After building two companies from 2003 to 2008, Alan L. Smith went to work for the private equity firm that originally backed him, Quantum Energy Partners. In 2009, after two years as a private equity investor, Smith was asked to take over Quantum Resources, a direct investment oil and gas fund that was struggling, to turn the fund around and make it into a world-class oil and gas company.
Smith accepted and turned his attention to the task of moving Quantum Resources from Denver to Houston.
The company’s founders stayed involved, but Smith was commissioned to turn around the existing asset base. He negotiated a compensation structure for himself and his team, and though he says working with the founders was awkward initially, they slowly built a trusting relationship.
The obstacles they had to overcome were replacing 42 of the 47 professionals that did not move from Denver, solving engineering problems in the company’s largest asset, which was underperforming, and finding a way to put the remaining equity to work in a way that would improve the overall return of the fund.
Smith and his team have accomplished a great deal in the past three years. The company now has 110 professionals, and it has lowered its operating costs while increasing its asset run time.
After completing the acquisition of the assets that were mainly in the company’s existing core areas, Smith worked closely with the founders to launch an upstream limited partnership in 2010, QR Energy LP. This financial engineering alternative enabled Smith and his team to place certain assets from the sponsor, Quantum Resources, into the IPO of QR Energy at a significant premium to the asset value.
How to reach: QR Energy LP, www.qracq.com