UT System invests $200 million in oil, gas

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The investment firm for the UT System committed $200 million to Post Oak Energy Capital, a company that invests in the North American oil and gas industry.

Last week, The University of Texas Investment Management Company committed the money to Post Oak over the next three years. UTIMCO is the entity which invests endowments for the UT System and the Texas A&M System.

Part of the commitment to Post Oak is from the Permanent University Fund, which is a public endowment based upon West Texas land grants. A portion of UT Austin’s budget comes from the PUF, which UTIMCO manages.

Mary Knight, associate vice-president and budget director for the University, said UT-Austin’s portion of the Permanent University Fund goes into the Available University Fund. For 2011 to 2012, the AUF is expected to provide about 13 percent of the academic core that goes towards University needs, like salaries and maintenance.

“UTIMCO provides estimates for AUF and endowment income,” Knight said. “We use their estimates for investment payouts to prepare the AUF and endowment budgets.”

Post Oak managing director Frost Cochran said in a press release that the company’s management team has extensive experience in the energy industry, which now includes the support of UTIMCO.

“This significant commitment from a sophisticated energy investor allows us to continue to build our investment model during a period of modest competition and high-quality deal flow.”

Mark Warner, UTIMCO managing director of natural resource investments, said UTIMCO actively invests in the energy industry. Warner said UTIMCO knows Post Oaks professionals, and the company has a very good reputation. The commitment is unique, Warner said, because Post Oak targets smaller energy companies that cannot find money as easily as larger energy companies.

“We believe that portion of the private market is much less competitive,” Warner said.

Warner said he expects the Post Oak commitment to help grow the endowment funds that funnel into the UT and Texas A&M Systems, which is the objective of UTIMCO.

“This was their first attempt to raise a fund, and we decided we could craft a partnership that would meet their needs and fulfill our objectives,” Warner said. “We expect the appropriate risk-adjusted returns for the strategy.”  

Printed on Tuesday, November 22, 2011 as: UT System invests $200m in energy company