The relationship between family investing offices and energy businesses has warmed up significantly in the 2020s after a lengthy rough patch, panelists at Hart Energy’s Energy Capital Conference said June 4.

“You saw a trend kind of moving away from capital and moving away from the energy sector seven, eight, nine years ago,” said Brad Nelson, managing director at Stephens Inc., based in Little Rock, Arkansas. The firm provides investment banking services to hundreds of family offices.

Nelson said oil and gas lost the trust of family offices starting with the market crash in 2008 and then through overaggressive spending in the 2010s. The ESG trend prompted others to take their capital elsewhere.

“If you think about what happened in 2008, 2009 and then the downfall from 2014 through 2016, you just saw a lot of these companies produce basically subpar returns, a lot of destruction of wealth in those two cycles,” Nelson said.

Energy companies have had to rebuild the trust of investors, he said.

James Peachey, senior associate at QuikTrip Investment Group, said family offices are noticing the improved capital discipline. QuikTrip, the privately held convenience store operator based in Tulsa, Oklahoma, started an investment office to find ways to deploy underutilized capital, Peachey said. Its only energy investment so far is in a large minerals and royalties portfolio.

“With the energy opportunity, there were a lot of institutional investors leaving for non-economical reasons, which was driving down valuations,” Peachey said. “That offered us an opportunity to have a very stable cash flow asset with no operating risk.”

Stephen Thomas, founder at Webs Creek Capital, a Dallas-based investment manager focused on investing exclusively in the energy sector, said family offices understand the long-term nature of energy investments because they also have long-term outlooks.

It’s important to align “the management and founder vision with the investor base’s vision,” he said. “You’re bringing in families that understand the duration of the investment, they understand that this is going to be a dividend-type model or where you’re going to hold it for 10 years and sell it at a big exit. That’s really critical.”

Nelson said many offices have done a “good job of getting smart on the sector over the last four, five, six years” by hiring experts in the field.

The offices can also move fast. Thomas said one of his funds was $100 million short of its target when he found a family office that had made money in energy.

“They co-invested with a bunch of other groups and literally raised the other $100 million in a period of three weeks,” he said. “I had been beating my brains against the wall for six months.”

With the trust restored and so much in common, it could be the beginning of a beautiful friendship.

“We’re in the early innings of family offices coming and bringing capital to energy,” Peachey said. “Especially with the supply-demand imbalance that we are going to have with the power demand, I think there’s going to be more and more partnerships for folks who are seeking family office capital.”

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