The article addresses the prolonged volatility in oil prices, which, perhaps surprisingly, has led to “a general uptick in private capital flowing into the oil patch.” Many big name private equity firms, the authors note, have been investing in distressed energy companies. At the same time, however, Arora, Nelson and Shoemaker write that there are many assets “on the market today [that] are not up to par, and any financial sponsor seeking to deploy capital should conduct thorough due diligence to separate the wheat from the chaff.”
The article proceeds to examine certain transaction structures and considerations investors can use to reduce their risks when investing in the oil and gas industry, including diversification, co-investment strategies and staged financing.
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