Abhishek Kumar

Co-founder and Principal, Production Lending, Houston
Abishek Kumar

Had Abhishek Kumar been asked what he saw himself doing when he was 35, he would not have said he pictured himself running his own company. For eight years after graduating college, he worked with Energy Investment Banking before leaving to start his own business in 2016. Now, through the highs and lows of the energy sector, Kumar gets to enjoy the fruits of his labor.

“Being able to run my own business at the age of 35 was a career milestone I did not expect to achieve that soon,” he said. “This gave me freedom to spend my time on things that I enjoy the most and also allowed me to make independent decisions that gave me tremendous professional satisfaction (and many anxious sleepless nights).”

Originally from Ghaziabad, India, Kumar now lives in Houston with his wife and two children, and he serves as principal and co-founder of Production Lending.

Career decisions

“I did not have much exposure to the oil and gas sector until I went to the McCombs School of Business for MBA. At McCombs, there were a lot of opportunities to connect with successful professionals from the sector and to learn from them. I was an engineer prior to getting into the business school, and the complex, technical nature of the sector appealed to me. I did my internship at a small energy-focused investment bank in Houston and had a great time there. I decided to make a full-time career in the sector and joined Wells Fargo in their oil and gas investment banking group.”

A brief history

“I am really proud of building the Production Lending business with my partner Ryan Childs. At Production Lending, we provide capital to lower middle market oil and gas companies. Back in 2016, when we started this business, banks were receding from the space due to OCC regulations and institutional capital was hesitant in deploying capital with small independent companies. The segment that we were catering to was fraught with risk. However, Ryan and I also knew that there were some great assets that were undercapitalized just by virtue of being subscale. We also knew that many exceptional operators were chasing these opportunities and decided to back them.

In the past five years, we have closed 24 debt deals and five equity deals. I am really proud of the track record that Ryan and I have built over the last five years working closely with our operating partners and delivering consistent returns for our investors. I signed final papers on two of the first three deals that we closed at Production Lending just a couple hours before my daughter was born and when my wife was at the hospital. I knew right then that she was going to be very lucky for us!”

Leaping over hurdles

“Oil and gas projects are often highly complex and, as the time has proven, it is very easy to incur a loss due to insufficient understanding of the risk. Good leaders understand the full scope of the project and are able to identify areas of focus to effectively manage and mitigate inherent risks. On the same note, despite having a near perfect plan, things almost always never go according to the plan. During such times of crisis, people who are able to adapt to an adverse change quickly and communicate with their partners effectively differentiate themselves as great leaders of the industry.

COVID-19 presented significant challenges, not just for us but for everyone. It was especially brutal for the oil and gas sector that saw its third price collapse in 12 years. During this time we proactively worked with our partners to come up with solutions to provide them with tools necessary to survive the downturn. Some of our partners cut their operating costs by more than 35% without impact on production. Additionally, we were in a better spot because our companies were mostly hedged, had conservative leverage and were running a low cost business. Due to success on our deals, while capital continued to recede from the sector, we closed four transactions last year.”

Evolving and adapting

“I believe that this is one of the most complicated and technical sectors. I find the boom-and-bust nature and ever-evolving structure of this sector very exciting, as it always provides a lot of interesting challenges and problem-solving opportunities, especially regarding risk management, which are appealing to me both as an engineer and as an investor.

The U.S. oil and gas sector has gone through massive transformation in the last decade. The shale revolution made the U.S. one of the largest producers of oil in the world. However, there has been significant reduction in capital that is available for the sector now, as investors are much more focused on profitability than growth and due to focus on ESG. In my opinion, the industry is much more competitive and nimble now, but we need to continue to focus on being more conscious about our carbon footprint. I have seen a lot of technology startups focused on enabling this transition through digitization, and I am very optimistic about our future.”

Three More Things

  1. My first entrepreneurial venture was an online platform to help people find sports instructors near them. My initial plan was to quit my banking career to grow this business full-time.
  2. I love dogs but am scared of them.
  3. Growing up, I was really proud of my theatrical skills and thought that was going to be my career.