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EnCap moves forward with succession planning amid fundraise

  • Dyal investment helped EnCap take next step in succession
  • No imminent retirements
  • Transitions to happen over years

EnCap Investments is in the early stages of a succession plan in which, over a period of years, younger managers will gradually move into senior roles, three sources told Buyouts in recent interviews.

Sources stressed that the plan is in the early stages and no specific current senior managers plan to retire immediately.

“They’ve come to a place where the firm has a chance, if they manage the succession right, to become an enduring institution,” said one limited partner with knowledge of the firm’s plans.

Casey Nikoloric, a spokeswoman for Houston-based EnCap, declined to comment.

EnCap’s senior leaders are David Miller, 66; Gary Petersen, 70; Martin Phillips, 63, and Robert Zorich, 66 — all founders and managing partners. The younger generation of managing partners includes Jason DeLorenzo, 45; Murphy Markham, 57; and Douglas Swanson, 44.

The founders have led EnCap since around its inception in 1988, according to the firm’s website. DeLorenzo and Swanson have been with EnCap since 1999; Markham has worked at the firm since 2006.

EnCap began its succession planning in 2011, one source said. The process moved forward after Dyal Capital Partners bought a stake in the management company in late 2015, the three sources said.

Dyal bought a 20 percent stake in EnCap for between $700 million and $800 million, the Wall Street Journal reported on Dec. 23, 2015.

It’s not clear exactly how Dyal’s investment helped move the succession process forward, but in general an investment in the management company generates cash that can be used to buy out owners’ stakes, one of the LPs said. The cash generated also can be used as loans to pay junior executives who have not yet made big money through carried interest, the LP said.

“Dyal helped facilitate another step in this process, which I think is great,” the LP said. “Sometimes these firms turn too cute and they don’t want to say who will end up leading the firm. … As an LP, I just want to know who my investors are going to be … how long the transition will take and if the founders are committed to it.”

Alexander Samuelson, a spokesman for Dyal, declined to comment.

EnCap is in the market now, targeting $6.5 billion for its 11th oil-and-gas fund. The firm closed its 10th fund on $6.5 billion last year.

Sources said the key-man group is not changing for Fund XI. A second LP said senior executives may have “another fund or two” to go before beginning to transition out.

Action Item: Check out EnCap’s leadership team here: http://www.encapinvestments.com/people/principals

A pump jack at the engineering school of Venezuela Central University in Caracas on Aug. 10, 2016. Photo courtesy Reuters/Marco Bello