Petro.ai Provides Due Diligence for Private Equity Funds from Entry to Exit Plan
Data Science & Analytics

Petro.ai Provides Due Diligence for Private Equity Funds from Entry to Exit Plan

Rosemary Jackson  •  

Private Equity Funds: Deloitte observes that “private equity firms are collectively sitting on at least $1.5 trillion of dry powder to help keep their existing portfolio companies going, potentially investing in firms suddenly in distress, helping transform companies and entire industries, as well as pursue other growth and value-creating measures.”

Petro.ai: Provides the platform to discover the opportunities out there, with a full end to end analysis of the rock and the ROI available in every shale reservoir.

Private equity funds are finishing 2021 with greater optimism in oil and gas investment as predictive engines like the Moody’s Investors Service see an increase in global oil and gas demand over the next year and beyond. According to the Houston Business Journal, “private equity investment in the oil and gas business could begin to pick up once again as upstream companies divest non-core assets from their portfolios.” Funds have cash from sitting out during the Covid crisis of 2020 and many are noting that energy is the top-performing sector in the S&P 500 so far this year. Finding the right portfolio among the many deal options is where Petro.ai’s fast and complete AI analysis can help funds understand both the best deals and the right exit plans.

Private equity funds have two functions,” Richard Gaut, CFO of Petro.ai begins. "One is making new investments, putting new dollars to work in purchasing acreage. Let’s say a fund buys some non-core acreage from a larger company for $750 million dollars. They’re going to invest another $100 million in drilling and completions to work up that acreage. Maybe they’re running 4 or 5 rigs. They need to outperform on the purchased asset.

Sequencing Case Study: Middle Knott & McGregor - difference in extraction

Where the fund would use Petro.ai is in acquiring their own understanding of the geology based on public data or based off private data that they’ve collected or seismic that they’ve shot or horizons that they’ve drawn. Then the fund can create their own projection for the performance of that acreage that they’ve purchased.

“If the rocks in this zip code behave like the rocks in that zip code then we can project what the performance of these wells would be. When we worked in similar areas, we knew that we could maximize production by doing these three things and we’re going to do the same thing when we work with this new acreage. Petro.ai can help do that also, that’s what the Pad Designer does. Petro.ai is bringing in the offset geologic data and building a digital twin of undeveloped acreage where a user can run different scenarios. If I completed in this pattern, if I use this spacing, if I use this frac design I could expect this production and this volume of revenue to come out of the ground.

"The second function of private equity funds is checking in on older investments. Once you’ve made the investment, it’s determining that money has been spent and options are executed according to the plan, making sure your old dollars are being taken care of. Because in 5 years you need to sell those old investments to a new buyer so you can raise your next funds.

“At the fund level you spend 70% of your time thinking about where to spend new dollars and Petro.ai can help with that evaluation. For a private equity spending new dollars, Petro.ai can help with this buy-side advice-analyzing using tools like the Pad Designer for different scenarios, imparting your own learnings from analogous areas onto this undeveloped area to see what’s possible.

“But then the other 30% of your time is thinking about the dollars that you spent last year or a few years ago to make sure that those companies are on the path to being an estate to be sold. You’re often on the board or you have some controlling position in that company and so in those cases, we can help existing companies who have been working in an area to maximize the value of the data they’ve already collected. Making sure they’re getting better from year 1 to year 2 to year 3. You should be because you’re spending more time in that acreage. You’re learning about how the rocks behave, you’re learning about the fracs. You’re learning about the production challenges. Petro.ai can accelerate that process because we can take in data from each new well you’re drilling. We can pull out ISIPs to build a predictive model about how fracs perform.

Petro.ai can identify if these new wells are going to be high performers or low performers using offset type curves. We can adjust for lateral length, landing zone, completion intensity.

private equity oil and gas shale reservoirs

“We can help existing investments, old private equity dollars, get better and continuously improve.

“At the fund level, if you’re thinking about these old dollars and the new dollars and that joint mandate that you have, if you have portfolio companies, old investments that you’ve made in a certain area, at the fund level you should be aggregating different learnings from your different portfolio companies that you’ve invested in. You should be learning about Martin County and Howard County and Upton County as your existing portfolio companies enter year 2, year 3. They should be feeding up some data in the fund. That means when you’re putting new dollars to work in that same part of the world, you should be making more intelligent decisions than when you made those initial investments. Which feeds into a continuously informed and updated exit plan.

“Petro.ai can help blend this information that you should be getting from your existing portfolio companies—so we can make your portfolio companies better and their future sale a solid return on investment.

Then, Petro.ai can capture data from those portfolio companies to help inform new investments that you’re going to make in the same counties or in the same basin.

“This broad-based model develops a higher and higher accuracy over time because we’ll have made investments that will have matured and we’re capturing that data. Petro.ai pulls in data from a company’s portfolio companies to make smarter investments with their new dollars. But also, to create an exit plan that allows for confident movement in the market.” 

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