Investors should be cautious about the oil and gas price resurgence, says Eddie Keith, head of infrastructure secondaries investing at Ares.
Upstream oil and gas are fundamentally incompatible with infrastructure secondaries, Keith tells Liquid Courage. Keith draws on deep experience across energy cycles to explain what separates investable oil and gas opportunities from "traps," why midstream and LNG can sometimes fit an infrastructure mandate while upstream almost never can.
Among the key takeaways of this conversation:
• Upstream oil and gas contradicts the core promise of infrastructure secondaries. No matter how smart the buy, commodity prices will drive 70 to 80% of the outcome — which directly undermines the stability, predictability, and cash flow yield that infrastructure investors are trying to deliver.
• Midstream is not automatically safe. The difference between a take-or-pay contract and an acreage dedication is the difference between infrastructure and a commodity bet.
• The energy private equity universe still hasn't recovered from the 2015-2016 crash, leaving capital in the space well below what a natural level would look like today.
• Renewables are no longer optional. The explosion of data center power demand means the math simply requires a healthy renewables market, regardless of the political environment.
Access the full transcript and a searchable library of content at the Liquid Courage Substack
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