Investment Fundamentals

"We need to see proof of concept before we put steel in the ground. We are disciplined in our review of the upstream economics and performance specifications of each basin."

Billy Lemmons, Managing Partner
EnCap Flatrock Midstream

We are midstream specialists.
Our focus is close to the wellhead. We invest in opportunities in natural gas, natural gas liquids and crude oil. Ours is a hard-asset business that provides services including natural gas gathering, treating, processing and storage; crude oil gathering and transportation; and natural gas liquids fractionation, storage and transportation.

There is no substitute for experience.
We support seasoned management teams that have proven track records of success and fit a well-established profile. Specifically, we look for strong technical and operational skills, a demonstrable record of value creation, a well-defined business plan and a common understanding of risk and midstream fundamentals.

We target companies in the early stages of developing their business plans.
Small companies have greater growth prospects than their larger counterparts and significant opportunities to benefit from the operating leverage created by spreading fixed costs over an expanding revenue base. These companies also receive a significant increase in the valuation multiples applied to their operating profits as they become larger and more sustainable. We also believe that growth companies make excellent investments when they are nurtured and advised by a capital provider with deep experience in the midstream sector and expertise in managing and building businesses.

We are relationship driven.
Developing strong internal and external relationships is foundational to what we do at EnCap Flatrock. We look for management teams that are cohesive and value teamwork, just as we do. At the end of the day, midstream is a service business. We only invest in management teams that understand the value of building strong relationships and put a premium on providing superior customer service.

It all starts with supply.
We are rigorous in our evaluation of the upstream economics of every opportunity. We look for companies with unique competitive advantages based on market segment and/or geographic location and the opportunity to establish long-term, fee-based contracts with substantial acreage dedications.

We seek majority investment positions.
We invest in situations in which we control the board of directors and all major investment and strategic decisions. We expect that capital commitments from EFM Fund III will average $200 million to $250 million; however, we also work with our investment partners to pursue opportunities requiring larger commitments.

We are disciplined about risk management.
We take a conservative, disciplined approach to advancing capital, doing so in incremental stages as each business plan proves itself over time. We limit the use of leverage to fund growth and apply a thoughtful investment philosophy that balances capital preservation with value creation and makes use of the risk management tools that have guided our founders for three decades.

We build opportunity sets that are valued in the market. 
Our investment horizon is three to seven years. Over time, we expect to re-back successful management teams.