As the oil and gas industry continues to face significant challenges, private equity professionals have their hands full. Valuations that were once reliable, are now fraught with new complexities due the extreme volatility in commodity prices. Lawyers from Winston & Strawn LLP recently spoke to Hart Energy about the challenges for private equity in the oil sector and their path to recovery.

Private equity partners need to effectively work with their portfolio companies to ensure survival and plan for future success, according to Mike Blankenship, corporate partner at Winston & Strawn.

“Survival requires ensuring the financial strength of the individual portfolio company, which includes checking balance sheets, analyzing credit facilities and other debt arrangements, watching for supply chain disruptions, counterparty and bankruptcy risks. In some cases, consolidating portfolio companies within a fund may help create the desired economies of scale and reduce unwanted G&A costs. This is especially true in basins or regions where it is clear there is only room for a few companies to succeed,” he explained.

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