Earlier this week, PE Hub launched a new ongoing series of articles exploring private equity investments in energy. Here we talk with Kimmeridge co-founder and managing partner Ben Dell. The conversation comes at a time when the US government is urging increased production of both oil and gas to offset some of the deficit created by the sanctioning of Russia for invading Ukraine.
Dell is rallying investors to seize the opportunity of rising oil and gas demand and inject capital into a sector that is increasingly under fire over ESG concerns. He says it’s possible to produce traditional energy sources with reduced carbon emissions. The New York private equity firm is ambitiously investing in net zero emissions within the oil and gas sector.
Over the last several years, many investors have backed away from the sector. “The amount of dollars that have become available to put to work have shrunk dramatically,” Dell said, adding that the biggest challenge for managers right now is raising capital “because of the headline ESG divestment movement that continues to evolve in the background.”
To court wary investors, Dell said the sector must demonstrate a clear path of reducing carbon emissions and build confidence around sustainable drilling.
He said the US has an opportunity to do two things now: to grow its energy sector; and do it responsibly. “If you can solve that issue, then there is no reason you shouldn’t want both because growing oil and gas domestically for export helps from a geopolitical standpoint, and it is also a large driver of GDP.”
Kimmeridge recently launched Chestnut Carbon, a nature-based carbon offset platform it will seed up to $200 million. According to the firm, “Chestnut will generate high-quality forest carbon offsets that are additional, verifiable and biodiverse to accelerate the path to net zero across a range of industries.”
The move is among many made by Kimmeridge recently.
Desert Peak Minerals, founded by Kimmeridge to acquire, own and manage mineral rights and royalties in the Permian Basin, announced in January that it was merging with publicly traded Falcon Minerals in an all-stock transaction valuing the combined enterprise at $1.9 billion.
“The combination is expected to create a premier mineral and royalty company at the front end of operators’ cost curves, with low leverage, an emphasis on shareholder returns and a significant footprint in the Permian Basin and Eagle Ford,” read the statement about the deal.
Kimmeridge is the largest shareholder in Civitas Resources, which describes itself as Colorado’s first “carbon-neutral oil and gas producer.” In February, Civitas announced the acquisition of privately held Denver-Julesburg Basin operator Bison Oil & Gas II for approximately $346 million.
“My real ambition is to see oil and gas companies like Civitas added back to ESG funds,” Dell said. He hopes that ESG funds will “understand that the company is already reducing its emission footprint and has offset its footprint and is delivering a net zero product.”
For more on Dell’s approach, see the guest article he wrote recently for PE Hub, “What if oil and gas had no net carbon footprint?”