Family offices plowing money into shale as private equity retreats

Once a relatively rare presence in the U.S. oil industry, firms overseeing the assets of ultrarich families — including the billionaire dynasties of George Soros and Carlos Slim — are pouring money into shale.

The sector’s more stable returns after years of boom-and-bust cycles are luring companies that manage the fiscal affairs of deep-pocketed private investors. They’re helping fill a void left by private equity, which is cashing in on a wave of driller acquisitions and shifting to greener investments. Family offices are putting about $15 billion to work in U.S. shale, according to the financial services firm Stephens Inc.

That support could prove crucial for drillers if they’re to maintain the country’s position as the world’s largest oil producer. After years of blockbuster expansion, shale output growth is slowing as some of the best spots have already been tapped. Geopolitical turmoil and Donald Trump’s tariff threats are roiling crude prices in the short term, while the energy transition is clouding the long-term picture for demand.

“Families said, ‘There’s opportunity here and good margins to be made,’” Wellford Tabor, managing director at HF Capital, the family office for Tennessee’s billionaire Haslam dynasty, said at a conference in Houston last month. “If I’m comfortable with it and my family is comfortable with it, let’s just go do it.”

Matt Gallagher is a third-generation oilman with decades of energy sector experience, but until recently, he had rarely heard from family offices. Now he’s talked with 70.

The oil producer he founded, Greenlake Energy Ventures LLC, is backed by the private equity firm NGP Energy Capital Management. But six family offices are helping fund Greenlake’s operations in West Texas’ Permian Basin. Five others are in discussions to finance potential acquisitions and long-term drilling plans, while dozens more have expressed interest in the company. Gallagher declined to name the firms.

Signs of increased family office interest are proliferating elsewhere in the shale patch. The Haslam clan, which made its fortune building the Pilot Flying J truck-stop chain and owns the National Football League’s Cleveland Browns, were part of a small group of investors that bought Rocky Mountain natural gas producer PureWest Energy LLC for $1.8 billion in 2023. AG Hill Partners LLC, the family office that traces its roots to famed oilman HL Hunt, led the consortium.

For years, most of the generational wealth flowing into U.S. oil came from families like the Hunts, who made their fortunes in the industry. But now, new money is coming in from dynasties like the Haslams and the Pears family, who built a UK real estate empire. The family office of former hedge fund manager Soros added more than $30 million in new energy company stakes during the third quarter, including Magnolia Oil & Gas Corp. and Hess Midstream LP.

The firm managing investments for Carlos Slim, Latin America’s richest person, boosted its stake this month in the U.S. oil refiner PBF Energy Inc. That’s on top of picking up more shares of offshore producer Talos Energy Inc. in 2024.

Representatives for Slim, Soros and the Haslams didn’t immediately respond to requests for comment. At a press conference last year, Slim discussed his investment in PBF and oil, saying he likes the sector because “it connects production, refining, and you're close to petrochemicals as well.”

Shale operators are expected to source 12% of their total capital this year from family offices, up from 7% just a few years ago, according to law firm Haynes Boone. A survey of family offices published by KKR & Co. Inc. last year also noted increased appetite for oil and gas investments.

“The word’s getting out: There’s money in oil,” said Jeff Nichols, co-chair of the energy practice group at Haynes Boone. “A lot of the market really turned away from oil and gas, and now it’s turning back, and family offices are at the leading edge of that wave back into oil and gas.”

The investment results have been compelling. For much of the past decade, the S&P 500 Energy Index posted a negative return on capital because companies were burning cash to pursue expensive growth plans. But that metric rebounded to 22% after the pandemic as companies cut costs and commodity prices skyrocketed. The energy index’s return on capital is currently 9.6%, well above the wider index’s average of 7.8%. The figure is probably even higher for private investments.

The exodus of private equity and institutional investors like Blackstone Inc. and Apollo Global Management Inc. from shale began several years ago after a rapid runup in production caused oil and gas prices to crater, dragging drillers’ stocks with them. A global transition to cleaner energy has accelerated that investment shift.

Capital raised by private equity firms in energy, which averaged $21 billion a year from 2010 through 2019, has tumbled since, averaging about $6 billion annually, according to a presentation last week by one of the biggest private equity investors left in shale, Quantum Capital Group LLC.

Coinciding with that drop has been a buildup of family wealth. From the end of 2019 to 2024, the total net worth of the world's 500 biggest fortunes almost doubled to $9.7 trillion, according to the Bloomberg Billionaires Index. At least a fifth of the world’s 500 richest people now have a firm managing their private fortunes, the index shows. Shale producers, meanwhile, have reined in spending and become more efficient. They’re also returning cash to investors in the form of dividends and buybacks instead of plowing it back into production growth.

That has made family offices more comfortable investing directly into shale, said Doug Prieto, CEO of Tailwater E&P, a unit of the private equity firm Tailwater Capital LLC.

“Whereas before, a lot of families that we talked to said, ‘I had an experience in 1991 where I did a deal and I lost my money,” he said.

Family offices tend to write smaller checks compared with institutional investors, but they’re also teaming up with peers to buy stakes in wells, participate in private debt placements or even buy closely held producers. Paul Lee, operating partner at Tailwater Capital, led the acquisition of Colorado driller Verdad Resources in 2022. The deal came after Tailwater assembled a group of family offices to raise more than $900 million in capital.

The moves are the latest sign that family offices are stepping in to take risks when other investors shy away. They’ve pushed into the markets for buyouts, real estate and assets sold by private equity. In recent years, they’ve even bought stakes in publicly traded companies and pushed for changes. Because they usually serve a single client or small group of clients, they’re able to be more nimble than other institutional investors.

Family offices are willing to stay in investments longer than private equity firms, which generally need to see growth within three to five years before exiting. As the shale industry matures and drillers look to stretch out their dwindling reserves, wealthy families may make ideal investors.

They’re also starting to venture off the beaten path and consider oilfields that had been overlooked during the days of shale’s red-hot expansion. The investment firm Esperanza Capital Partners has received the backing of Cockrell Interests LLC, the investment office of the oilfield family whose name adorns the engineering school at the University of Texas at Austin. Together they’ve made several acquisitions since 2021 in the Gulf of Mexico, where oil production is more costly but falls at a slower rate over time compared with shale wells.

“We like that combination of the low decline, being able to take shots where we can” and having free cash flow, William Goodwin, managing partner at Esperanza, said Jan. 23 at the Independent Petroleum Association of America’s Private Capital Conference in Houston. “That marries well with family offices” that want long-life assets with a steady stream of income.

Still, shale drillers’ fortunes remain tethered to oil and gas prices, creating risks for investors. Greenlake Energy Ventures’ Gallagher is trying to prepare some of the new-to-oil family offices backing his company, suggesting tools like crude-price hedging options that can help protect against losses.

For now, though, family offices’ growing interest in shale shows little sign of abating. Stephens tracks about 350 family offices in the U.S., with about a quarter of them invested in oil, said Keith Behrens, who heads energy investment banking at the firm.

“This is not all just hypothetical or a 10-year project to get families to invest,” Behrens said. “They’re actively investing right now.”