The ensuing decades brought a period of industrial transformation and wealth creation matched by few—if any—in the annals of American history. Dreamers and drillers came to Texas from all over. Oil towns boomed and busted. And the black gold continued to gush forth from the ground, millions upon millions of barrels, enough to fuel the rise of the automobile age, two world wars and America's metamorphosis from international afterthought into global superpower. The nation's oil became indispensable. And the nation's oil came from Texas.
Fortunes were created. Big, vast, sweeping fortunes, millions upon millions of dollars at a time when a single million was still an incomprehensible amount to most. Some of them disappeared just as quickly as they arrived, spent on big planes and big ranches and big private islands, spent without concern because the next oil strike was always right around the corner, surely, even when it wasn't. But some of the fortunes lasted. And as you might imagine, some of them have since become intertwined with the world of private equity.
The petroleum polygamistHL Hunt was a shrewd, perhaps brilliant, man with three wives, 15 children and one of the biggest bank accounts of his age. He began to build his fortune in earnest during the 1930s, after purchasing the rights to a vast swath of the East Texas Oil Field shortly before that huge pool of underground wealth was discovered.
Later in life, he was known for his ventures in Libya, his ill-fated support of Sen. Joseph McCarthy and the exploits of his offspring: Sons Nelson and Bunker became infamous for a disastrous attempt to corner the world silver market, while another son, Lamar, was a co-founder of the American Football League before it merged with the NFL. The AFC championship trophy is now named in his honor. But H.L. Hunt was known most of all for being one of the richest Americans of the 20th century.
In the 1990s, it was Lamar Hunt who began putting the family fortune to work in private equity by launching Hunt Capital Group. While the firm's first fund consisted entirely of family money, according to an old Dallas Business Journal feature, it raised a $70 million sophomore fund in 1999 that included cash from some big-name LPs. Hunt Capital was said to target deals worth $10 million or less, with a focus on companies in the southwestern US.
In 2004, Hunt Capital undertook a shift in strategy. That year, instead of raising its own fund, it became one of the two primary backers of the debut vehicle from a firm called Trinity Hunt Partners, which would target bigger deals than the Hunt family was used to. But the two were still inextricably linked: Trinity Hunt planned to "retain many of the hallmarks of the Hunt family's investment style," again per the Dallas Business Journal, and Hunt Capital and Trinity Hunt for a time shared office space in downtown Dallas. Multiple Hunt Capital investors made the move to Trinity Hunt, including Scott Colvert—who joined Hunt Capital in 1999 and remains at Trinity Hunt to this day.
The firm is still an active investor, with more than $775 million in capital raised to date. It operates mainly in the business services, healthcare services, industrial growth and consumer products sectors, targeting companies in the southern half of the US with up to $25 million in EBITDA. It closed its fifth flagship fund last October, hitting a hard cap of $350 million.
The kingmakersIt's fair to say most Americans were struggling financially during the Great Depression. But it was during the 1930s that many of the largest fortunes in Texas oil were born. That was the case for H.L. Hunt. And that was the case for Sid Richardson, a longtime wildcatter who rode the markets ups and downs for more than a decade before eventually striking it rich in 1935, drilling dozens of highly profitable wells in what came to be known as the Keystone Field.
In the ensuing years, he became something of an archetype for the new Texas oil tycoon. He bought multiple massive cattle ranches and his own private island. He collected paintings by Frederic Remington, Charles M. Russell and other famous chroniclers of the American West. He befriended J. Edgar Hoover and Lyndon Johnson. He became a close confidant and backer of Dwight Eisenhower. He was a noted philanthropist who contributed huge sums of money to charity.
But when he died in 1959, Richardson also left a healthy chunk of change to Perry Richardson Bass, his nephew and business partner. Perry Bass and his son, Robert Bass, promptly began turning their inheritance into a fortune for the ages. They diversified away from oil, putting their millions to work in the stock market, real estate and other asset classes. In 1981, The New York Times profiled the family under the headline "Even for Texans, the Basses are rich," quoting an unnamed former Morgan Stanley executive who described the Basses as "very, very quiet, and very, very powerful."
The Bass Family Office became successful enough that the investors who worked there could go out and raise capital of their own. In 1992, two men did just that. Their names were David Bonderman and James Coulter, and they called their new firm the Texas Pacific Group. It soon became known as TPG Capital. Today, TPG is of course one of the largest private equity firms in the world, with more than $100 billion in AUM. And it might not exist at all if Sid Richardson had never found oil.
The cowboysYears before Richardson made his true fortune, he spent a time trading oil leases in North Texas with an old acquaintance named Clint Murchison. The two men eventually parted ways in business, but they remained friends for the rest of their lives. In 1929, Murchison founded the Southern Union Gas Company. In 1930, he followed the lead of H.L. Hunt and turned his attentions toward what would soon become the wildly profitable East Texas Oil Field.
Another Texas oil fortune was born. Murchison became one of the first oilmen from the state to show a marked interest in conservative politics, battling in favor of states' rights and against government intervention in the oil market. Like Richardson, he was close with J. Edgar Hoover and a supporter of both Dwight Eisenhower and, for a time, Lyndon Johnson.
Much of America, however, got its introduction to the Murchison family in the form of football. In 1960, Clint Murchison's middle son, Clint Jr., became the founding owner of the Dallas Cowboys—which at first played in Lamar Hunt's AFL before joining the NFL. He owned the team for nearly a quarter-century before selling in 1984 for $80 million, at the time a record price for a pro sports franchise.
The younger Clint Murchison filed for bankruptcy a year later, reportedly with $150 million in debts. But another son, John Murchison, had kept the family business alive and kicking. Murchison Oil & Gas is still around today, an active developer and acquirer of oil & gas resources in the US, with a focus on the Permian Basin. And another family scion, Robert Murchison, is the president and founder of Murchison Capital Partners, a somewhat mysterious private equity investment partnership based in Dallas that's existed since 1992.
The new boomToday, Texas oil is in the midst of what might be a new golden age. The Permian Basin is going crazy, as improvements in technologies like fracking and horizontal drilling have made it easier and more efficient than ever before to suck profits up out of the ground—environmental side effects be damned.
If private equity had been around during the early part of the 20th century, the industry surely would have found ways to invest in the original Texas oil boom. It's certainly not going to miss the boat this time around.
Private equity firms made 105 investments in oil & gas companies based in Texas during 2018 worth a combined $36.7 billion, according to PitchBook data, with that latter figure representing the highest mark of any year this decade. The 105 deals account for exactly half of all oil & gas investments conducted by PE firms in the US last year, while the $36.7 billion is nearly two-thirds of the $59 billion in total oil & gas deal value in 2018.
In terms of deal count, at least, things have only grown more stark in 2019. As of May 31, more than 56% of all oil & gas investments in the US this year had involved companies based in Texas, again per PitchBook data, the highest share for any year since the financial crisis. Also of note, perhaps, is that many of the investors giving cash to those Texas companies are themselves based in Texas. Six of the 10 private equity firms that have been the most active investors in the Texas oil & gas space since the start of 2008 maintain their headquarters in the Lone Star State, led by EnCap Investments, which has conducted 48 deals in the state over that span.
Since you might be wondering: No, none of Trinity Hunt Partners, TPG Capital or Murchison Capital Partners has a spot on the list. No longer are the names Hunt, Richardson and Murchison the dominant forces in the world of Texas oil. But the industry they helped create is still here, is still thriving, and is still creating enormous new fortunes that will surely cascade down through our current century—a century in which the defining narrative could very well be the sweeping effects the oil & gas industry and other fossil fuels have had on the health of our steadily warming planet.
Our children may wonder if it was all worth it. To them, almost certainly not. But as long as billions of dollars of oil is still below ground, companies will likely be in the business of trying to extract it. And private equity always follows the money.
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