Private Investment Strategy
Annapolis’ mandate is to generate above average risk-adjusted returns in the medium to long term from investments made in the Canadian oil and gas sector. Annapolis’ focus is on investments in start-up and early-stage exploration and production companies, primarily in the private domain. Within the broader context of oil and gas equities, Annapolis believes that stronger returns can be found within the private-company sector, where some of the best and most cost effective teams in the industry operate. Many highly expertised teams prefer to be private where they can focus on maximizing long-term value. Accordingly, Annapolis invests in this more exclusive private market where a major pool of talent resides, where access to capital is restricted and where private equity funds, like Annapolis, are the preferred source of funding. That said, Annapolis has, and will continue to make investments in publicly traded companies that otherwise meet its investment criteria.
Private Investment Criteria
Annapolis is a fundamental value player that is focused primarily on multiple of return. Operating with a three to seven year investment horizon, Annapolis seeks to invest with management teams that focus on finding and developing oil and gas reserves at the lowest possible cost, while maintaining conservative capital structures. Although Annapolis prefers to liquidate investments into market strength, Annapolis places less emphasis on our investment strategy on commodity and equity market cycles, choosing instead to place primary importance on a management team’s ability to add fundamental value over the mid to long term. Since inception, a consistent, intentional weighting to oil over natural gas has contributed to overall returns.
In addition to visibility to multiple of return, key ingredients Annapolis looks for in investment opportunities are:
- Exceptional management teams – this includes technical expertise in specific commodity and play types, coverage of all critical disciplines (such as geology, engineering, finance and land), business acumen, ethically sound business practices and commitment to proper corporate governance practices
- Well-defined and risk-acceptable business plans
- Properly capitalized financing structure
- Alignment – examples include material equity commitments by management, incentive compensation for management that rewards management when shareholders achieve return expectations, and commonality of views on exit strategies
Management of risk, both on an individual investment and broader portfolio basis, is a primary focus of Annapolis’ investment strategy.
Private Deal Sourcing
Annapolis proactively originates investment opportunities, leveraging off of reputation and industry relationships. Annapolis views our primary differentiator in the market to be our principals’ years of leadership experience guiding business, operations, technical and financial affairs of operating oil and gas companies. Annapolis believes that this background has afforded Annapolis a preferred investor status with investee company management teams and other private equity funds. Annapolis also secures deal flow through invitations from investment dealers, other private equity funds and management teams.