Keith Behrens, Managing Director, Head of Energy & Clean Energy Transition at Stephens shares the trends affecting companies in the energy sector 

To begin, could you provide a brief overview of your career history and how you came to be in your current position? 

I joined Stephens in 2009 as Managing Director of our Energy & Clean Energy Transition practice. Before this, I was a co-founder and managing partner of Energy Capital Solutions, a boutique investment bank focused on the energy sector. I have around 30 years of investment banking experience, having previously held roles at Bear Stearns and Wasserstein Perella. Over my career, I have led more than 230 transactions totaling over $50 billion in value across M&A, equity, and debt. I have served on several industry boards and hold a BBA and MBA from the University of Texas in Austin. 

We’re seeing a major shift in who is investing in oil and gas. What’s driving this change? 

Traditional institutional capital – particularly endowments and ESG-focused investors – has pulled back from oil and gas, creating space for new participants. Family offices, private credit funds, and other private capital providers have stepped in to fill the void. These investors tend to focus on fundamentals rather than ESG optics and often focus on valuation metrics and cash flow profiles. This shift has created opportunities for advisers like Stephens to connect quality operators with this evolving investor base, and it is changing how capital is deployed and how deals are structured in today’s market. 

Why are European family offices increasing their exposure to upstream oil and gas right now? What makes this sector attractive to them? 

The geopolitical shock of the Russia-Ukraine conflict has underlined the importance of energy security across Europe, and some investors now view natural gas as essential. Some European family offices have responded by increasing exposure to upstream oil and gas, particularly in the US, which offers stability, scale, and competitive entry multiples. Many are targeting assets such as royalties and minerals that are capital-light and can project cash flow yields. I think some of them also see the US as a leader in energy innovation and operational efficiency. 

With banks and hedge funds retreating, what kinds of investors are stepping in, and how are they changing the way deals are structured? 

Family offices and private credit funds are increasingly active. Some family offices are engaging in private equity-style deals, but with longer hold periods and a more hands-off approach. Private credit funds offer financing at higher advance rates than banks, though at a higher cost of capital. These changes have prompted a shift in deal structures – and we are seeing more use of earnouts, seller notes, and equity rollovers. The new capital providers bring flexibility and a longer-term mindset, allowing energy businesses an opportunity to try to structure transactions that better align with their operational needs and the industry’s cyclical nature. 

ESG concerns have pushed many traditional financiers away from oil and gas. Do you think private investors view these risks differently? 

Yes – private investors typically take a more pragmatic approach. While ESG remains on the radar, they focus more on asset quality, returns, and cash generation. Many of them believe that oil and gas will remain essential for decades to come and are prepared to underwrite that view with capital. Their decision-making often seems grounded in the belief that hydrocarbons still play a vital role in energy security and economic development. This lens allows them to see opportunities at times where others may only see risk, particularly given the sector’s improved discipline and capital efficiency in recent years. 

Is this shift in investment a sign that oil and gas remain a long-term bet, or is it more of a short-term response to market conditions? 

I think some investors looking at the expansion of US LNG export capacity and growing demand from data centers and emerging markets expect global reliance on gas to be sustained for a long term. We have seen capital move into proven basins and high-yield assets that can deliver returns over a longer duration. 

What are the biggest risks and rewards private investors see in upstream oil and gas today? 

The principal risk is commodity price volatility, particularly in natural gas, which has seen significant swings in recent years. This volatility can complicate planning and capex deployment. However, the reward potential could be strong for investors if oil and gas continue to be a meaningful part of the future energy mix. 

How would you describe the current state of M&A in the energy sector? Are deals picking up, slowing down, or just changing in nature? 

M&A activity remains strong, particularly in upstream and in gas-weighted assets. Strategic buyers have been more active in 2024 than in recent years. OFS deal activity has seemed softer than some of the upstream interest. Stephens has remained active across all segments, helping clients navigate this evolving landscape with bespoke solutions that reflect the clients’ goals and objectives. 

How confident are investors about the future of oil and gas, and what factors are influencing their decisions? 

Investor sentiment is bullish, particularly among some family offices looking at this sector that think the energy transition will be long and complex, and hydrocarbons will remain essential throughout. A more supportive regulatory environment potentially could further boost confidence. 

With fewer traditional financiers in the space, are valuations being affected? Are deals becoming more competitive? 

Yes, valuations have adjusted due to capital scarcity, particularly from traditional institutional sources. This has created opportunities for private capital to step in. Some family offices and newer entrants are increasingly active, which could bring greater competitive tension to certain transactions.  

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