TriWest Capital invests in disruptive potential of Prostar Energy

TriWest Capital Partners recently completed the debut investments of its fifth private equity fund, which closed at $500 million earlier this year. They included a small Canadian service company that’s looking to fill a very big need: helping hard-pressed energy producers reduce costs through innovation.

In October, TriWest acquired an undisclosed majority interest in Prostar Energy Holdings LP. The deal, done in partnership with senior management, brings together the capabilities of two previously independent businesses: Prostar Well Service, an oil well service provider, and Rangeland Drilling Automation, a maker of well servicing equipment.

The new Alberta-based Prostar Energy operates a fleet of service rigs that utilize proprietary technology developed by Rangeland. This is a new breed of automated rigs, designed to replace older, resource-intensive systems and address the challenges of the heavy oil market. Its goal is to make well servicing more productive and less costly.

Jeff Belford, Managing Director, TriWest Capital Partners
Jeff Belford, Managing Director, TriWest Capital Partners

TriWest’s investment was the catalyst in the merger that created Prostar Energy, TriWest Managing Director Jeff Belford told PE Hub Canada. He said the firm made the bet because it believes in Prostar Energy’s “disruptive technology.”

“Prostar Energy has the only fully automated, fully integrated well service option out there,” Belford said. “Two years of experience in the field has proven that it works faster, works safer and operates with a smaller crew than conventional systems. It will save energy businesses money.”

Belford believes Prostar Energy is part of an emerging trend.

With the sharp drop in prices last year, private equity firms have deployed billions of dollars to oil and gas deals, many of them asset sales and distressed situations. Belford thinks more attention is now being paid to the innovative ideas of service providers. These ideas are focused on optimized production and savings for industry players that have already cut budgets to the bone.

“In today’s energy industry it’s an efficiency game,” he said. “It’s all about how to drive costs down as far as they can go. This is prompting a shift in the direction of new technologies that can make a significant difference to bottom lines.”

Prostar Energy is led by CEO Terry Bendera and Vice President Doug Hunter, who is responsible for manufacturing and engineering. They plan to build the company by winning over new customers and expanding into new locales, Belford said. TriWest will invest in the strategy, which will see rollouts of new products that continue to put a premium on innovation, he added.

TriWest Fund V’s other debut investment, Strike Group, was completed shortly before Prostar Energy. Strike Group is a Canadian energy service and construction business. It appealed to TriWest because of its customer base in multiple industries and its potential for further growth, Belford said.

The two deals came roughly eight months after the oversubscribed final close of TriWest Capital Partners Fund V LP in January. The fund raised $500 million primarily from Canadian and U.S. institutional investors, and included a substantial commitment from TriWest’s general partners.

Belford joined the Calgary-based TriWest in 2003 from Swiss Water Decaffeinated Coffee, where he served as CFO. Swiss Water was a TriWest portfolio company between 2000 and 2002.

Photo of oil well servicing courtesy of Prostar Well Service

Photo of Jeff Belford courtesy of TriWest Capital Partners