Dallas-based Pearl Energy Investments has closed a $705 million fund to target oil and gas opportunities, with management teams already focused on West Texas’ Permian Basin and Canada.

“I think the investment opportunity set today looks fantastic. The fundamentals of the business are good. There’s a lot of discipline on the E&P side of the equation as to what’s getting drilled, how it’s getting drilled,” Billy Quinn, managing partner of Pearl Energy, told Hart Energy. “You have good balance and discipline on the supply side, and you have limited capital availability in the market. Those two things combined present a nice investment opportunity for us.”

The new fund comes at a time when experts believe private equity is making a strong return to oil and gas.

Quinn said, however, that fundraising took lasted at least 16 months and was “brutal” work — made challenging because about a “third to half of the investment universe” of traditional energy investors had decided or were contemplating abandoning fossil fuels.

Nevertheless, the new fund, Pearl Energy Investments III LP, came together as the firm’s third and largest investment vehicle to date, Quinn said.

“Despite having phenomenal returns, it was a very challenging fundraise,” Quinn said.

Quinn said the fund is backing three management teams, with two focused on Texas and a third with a heavy emphasis on Saskatchewan, Canada.

Pearl typically targets investments of $25 million to $150 million, and has led investments requiring in excess of $400 million. The firm has $1.9 billion under management.

Earlier this month, Pearl Energy closed a commitment from the new fund with the Permian Basin’s Swordfish Energy Holdings LLC. Quinn said the firm willing to invest all over North America, although investments in Colorado, California or offshore would have to clear a high bar for Pearl to make an investment.

Quinn declined to name the firm’s investors, but said nearly all of them are institutional, including endowments, foundations and pension funds. There also was a strong participation from high net-worth family offices.

Stewart Coleman, partner at Pearl, said in a news release that the firm is convinced that current investment environment is attractive given persistent global demand, continued underinvestment in supply and limited access to capital for natural resources.

“We have built an exceptional team at Pearl and remain focused on supporting entrepreneurs and being value-additive partners to our management teams,” he said.

Quinn said that despite the hurdles involved in raising the new fund, the attractiveness of the investments is clear.

“People are really starting to come around … and really believe now is a good time to invest,” he said.

But it’s also clear that politics has permanently swayed others to avoid hydrocarbons.

“There's still a lot of the institutional investor world that is politically opposed to investing in oil and gas,” he said. “And that's capital that has left the system and won't be back anytime soon.”

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