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A team of former executives from Crosstex Energy and Regency Energy Partners has launched a private equity-backed company to build up a new pipeline business.

Caiman Energy LLC, incorporated in January, is sponsored by energy investors EnCap Investments LP and Flatrock Energy Advisors. EnCap is a private equity group with principals in Houston and Dallas that has focused mostly on the exploration portion of the energy equation. Flatrock, based in San Antonio, has been a longtime adviser to companies operating in the transport piece of the energy equation.

EnCap and Flatrock have raised $350 million thus far to back companies focused on the pipeline aspect of the energy infrastructure business.

For much of the last decade, the natural gas pipeline business has been dominated by master limited partnerships — publicly traded entities that pay substantial dividends to shareholders and enjoy some tax advantages over conventional corporate structures.

“We couldn’t have competed when the MLPs were out there competing with their cheap capital,” said Jack Lafield, president of Caiman Energy and a former executive at Crosstex Energy.

But as commodity prices have slid and financing sources have dried up, that model has been challenged.

“It’s not just hydrocarbon prices,” said David Miller, managing director of EnCap Investments. “It’s also no public equity and no public debt — it just changes the landscape.”

In addition to Caiman, EnCap and Flatrock are backing another pipeline startup called Cardinal Midstream LLC. It is led by Doug Dormer, Jim Bryan and Mack Lawrence, all of whom worked at Regency Energy.

Caiman’s startup team of Lafield, Danny Thompson and Rick Moncrief all worked together early in their careers at Delhi Gas Pipeline Corp. a subsidiary of the former Texas Oil and Gas Corp., along with the team at Flatrock.

“We all had a great opportunity to learn the business,” said Bill Waldrip, president of San Antonio-based Flatrock. “We see a great opportunity in the emerging shale plays. A lot of those don’t have the necessary infrastructure in place.”

Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University, said private equity investment in the pipeline business is a fairly good bet in the current climate.

“You’ve still got to move the energy from point A to point B,” he said.

What’s more, for cash-strapped energy companies, their pipelines are some of the easier things to put a value on, Bullock said.

“Producers probably a year ago were the biggest competition on the infrastructure,” Lafield said. “Producers had a lot of money, and they could build their own gathering system. A lot of them still have cash; they want to spend this on drilling wells.”

As of late February, natural gas prices were 67% down from their July 2008 peak. Despite that, natural gas producers are continuing to drill new wells, albeit at a slower pace.

“Drilling is still going on,” EnCap’s Miller said. “It’s easy to see there’s going to be significant infrastructure needs.”

That means lower purchase prices for acquisitive operations such as Caiman.

“The sellers don’t like it. They would like you to purchase their assets on cash flow of a year ago,” said Caiman’s Thompson. But time is on Caiman’s side.

“The vulture’s sitting up here on the high wire with some money. They will come to our price,” Thompson said.

Caiman aims to buy pipeline systems from natural gas drillers and larger pipeline companies, both of which need money. It also plans to look at building its own pipeline networks.