The energy-financing vacuum created last year by the exodus of Aquila Energy Capital, Duke Capital Partners, Shell Capital and Mirant Energy Capital Americas-all of them mezzanine players-is evaporating. New private-financing sources for the industry are stepping up to the plate. One is Houston-based Goldman Sachs E&P Capital. To be sure, it doesn't consider itself a mezzanine player. In fact, Jody LaNasa, managing director and head of special situations investing for Goldman Sachs in New York, eschews the term. "If a borrower needs a complete solution to its financing needs-whether it's an E&P or a midstream company-we provide both senior and junior secured debt as a package, with higher advance ratios than a typical commercial lender and a blended cost of capital between mezzanine and bank debt." The Houston entity, which opened in July, can leverage off Goldman's extensive fixed-income, currency and commodities businesses. "Through them, we're able to provide E&P clients multi-year hedging arrangements-and we're willing to set those hedges up on both an asset- and cash- collateralized basis," says LaNasa. The private-capital provider is interested in setting up structured financings, such as volumetric production payments, whereby the client receives dollars in exchange for a future stream of oil and gas revenues, says Kurt Talbot, vice president and head of Goldman Sachs E&P Capital in Houston. "In short, we're not trying to peddle a specific financing structure-we're trying to provide capital solutions to E&P and midstream companies through a variety of corporate, project and structured-financing techniques," he says. Goldman Sachs E&P Capital is considering closing by year-end a $40-million, junior secured corporate credit for a private Rockies producer. "It will allow that operator to drill several hundred wells and convert its proved undeveloped reserves to proved producing reserves," says Talbot. Adds LaNasa, "While our sweet spot is $20- to $50 million, we can easily assemble capital in the $50- to $100-million range-or higher." Another new player in the private-capital arena is Petrobridge Investment Management LLC. The Houston firm, backed by $200 million of institutional funding, is headed by managing director and partner Rob Lindermanis, a Mirant Energy alumnus, and Michael Keener, another managing director and partner and former Shell Capital director. "We started Petrobridge this past April with the idea of filling the void in mezzanine and debt financing for producers created by the exodus last year of companies such as those for which we worked," says Lindermanis. It offers upstream mezzanine, subordinated debt, stretch senior secured debt-which usually carries a higher coupon than senior bank debt but less of an equity kicker than mezzanine-and production payments. "We tailor these products to help operators acquire producing properties, conduct development and exploitation drilling, recapitalize or monetize existing assets," says Lindermanis. "Depending on the type of financing provided, we're seeking rates of returns in the range of 10% to 20%-plus." So far this year, Petrobridge has completed three financings-a $14.4-million mezzanine backing for a private Gulf Coast operator, a $25-million subordinated debt facility for a private Denver company and a $3.85-million bridge financing for the subsidiary of a publicly traded, Midcontinent-based E&P and oilfield-services company. With more debt financings under consideration-in the range of $5- to $40 million-Petrobridge expects by year-end 2003 to have committed $75 million in private debt capital to the upstream sector. "That'll leave us room to back more corporate or project-financing opportunities," says Lindermanis. Recapitalizations don't necessarily always involve distressed situations or bankruptcies. "They can be for the purpose of meeting new goals or objectives for a company and its shareholders." The E&P candidates the firm seeks: managements with focused geographic or geological niches, strong technical and operating capabilities and "the ability to create value through existing assets and future opportunities."