Fulcrum’s primary approach to building asset value is through active ownership and unique industry relationships. Under normal market conditions, we seek to take sizeable positions in smaller oil and gas companies, enabling us to heavily influence business strategy and operational efficiency. Fulcrum also focuses on opportunistic investing. We will structure positions in asset level interests, structured equity, and private debt instruments, with the flexibility to either hold the investment over a medium term horizon or maximize value through an attractive exit opportunity.
Our Approach
Fulcrum believes in disciplined investing and concentrating on deep value opportunities.
- Niche Focus: Pursuing the best investments available, within a segment of the market that is under-capitalized
- Value Orientation: Mitigating risk through fundamental analysis and sound judgment, not generic models
- Ability to Price Risk: Investing across the capital structure where risk is mispriced
- Good Companies, Bad Balance Sheets: Identifying well-run businesses and assets with strong market positions constrained by over-leveraged capital structures
- Patient Investors: Approaching investments with a longer-term perspective to maximize value
- Active Owners: Engaging with management to create value
- Prudently Timing The Market Cycle: Opportunistically investing capital when others have acted prematurely
Our Investment Criteria
Transaction Type
- Non-marketed relationship deals
- Niche transactions in the distressed and special situations space
- Transactions where the majority of overall invested capital is returned through asset cash flow over a medium-term hold period
- Ability to hedge-in a robust base return, with substantial downside protection
- Pursuing new financings in areas with little access to current capital markets
- Pursuing financings at valuations supported by producing reserves and current cash flow
Transaction Size
- Transaction values typically up to $100 million for initial platform
- Typical MEC investment of $10-$25 million, with exceptions
Opportunity Set
- Underserved space in lower middle market oil and gas finance
- Capital intensive industry given asset heavy nature of the business
- Large wave of M&A, debt maturities, and capital requirements on the horizon
- Denver is an underserved market for energy private equity capital relative to the number of oil and gas companies in the Rocky Mountain region
- Strategic situations where flexible capital solutions are differentiated and existing capital providers are too large and over-specialized
Geography
- Top-tier oil and gas basins that are economic in a lower price environment
- On-shore assets in North America
Other Key Criteria
- Production and cash flow support valuation
- Creative deal structures
- Quality management teams
- Potential for operational enhancements at the asset level
- Structuring downside protection through commodity price hedging, amortization mechanisms, covenant protections, etc.