Haynesville assets hit the block as natural gas prices rally

Comstock

22/10/2021 06:00

By Jessica Resnick-Ault
    NEW YORK, Oct 22 (Reuters) - Private equity firms are
looking to sell companies and land they own in the
second-largest U.S. natural gas producing formation, where
values have surged along with gas prices worldwide and booming
U.S. exports of liquefied natural gas (LNG). 
    So far this year, the Haynesville formation in Northwest
Louisiana and East Texas has had four deals totaling $1.65
billion, according to Andrew Dittmar, director at Enverus.    
Next month, the Haynesville is expected to produce a record 13.6
billion cubic feet per day (bcfd), about 15% of U.S. shale gas
output.  urn:newsml:reuters.com:*:nL1N2RE20N
    U.S. gas futures recently touched 12-year highs, and prices
have skyrocketed even more in Europe and Asia, where buyers are
desperate to lock down supply to deal with growing needs for
power. 
    Smaller firms see the natural gas rally as a chance to
divest assets they have held for three years or more. There are
several big transactions in the offing, each estimated at over
$1.5 to $3 billion, as well as buyers looking to purchase
smaller assets from individual holders, according to advisors. 
    The sellers include private equity companies that held off
from selling when prices plunged last year early in the
coronavirus pandemic. 
    "They were planning a 2020 exit three years before and then
2020 just didn't materialize," said Brock Hudson, managing
director at Carl Marks Advisors, an investment bank that
provides financial and operational advisory services. 
    Gas futures  NGc1  have rallied this year, touching a high
of $6.280 last month, more than twice the seasonally-adjusted
10-year average of $3.0141. 
    There is additional space on pipelines from the Haynesville
to export hubs on the Gulf Coast including Sabine Pass,
Louisiana, and Freeport, Texas. By comparison, lines running
from the Marcellus shale in Pennsylvania are near capacity. The
United States now exports roughly 10 billion cubic feet of gas
daily as LNG, with several companies expected to add more space
in coming months and years.
    Haynesville producer Rockcliff Energy, a private-equity
backed firm with over 1 bcfd of production, is expected to go on
the block by the end of this year, according to people familiar
with the company. 
    Rockcliff offered high-yield debt last month, a move some
companies have taken to improve balance sheets before pursuing
strategic options, such as a sale of the company. Rockcliff did
not respond to requests for comment. 
    Reuters previously reported that Haynesville producers such
as GeoSouthern are already on the block.  urn:newsml:reuters.com:*:nL8N2QA4YO
    Dollar-per-acre values have risen substantially, said
Dittmar at Enverus. Comstock bought Haynesville producer Covey
Park in 2019 at $3,000 per acre adjusted for production. This
year, two deals were valued at nearly four times as much per
acre. 
    Companies eager to produce gas as a cleaner alternative to
oil, like Chevron Corp  CVX.N , have also expressed interest in
the Haynesville.  urn:newsml:reuters.com:*:nL4N2QG2GV
    Buyers have turned to the Haynesville as acreage deals
became harder to come by in the Permian basin of Texas and New
Mexico, said Ben Heinzelmann, president at Energy Domain,
a marketplace for sellers to market their mineral, royalty, and
non-operated working interests.      
    Gas exporters like Tellurian Inc  TELL.O  say they are among
the potential buyers for gas assets coming to market. The
company is boosting gas production in the Haynesville ahead of
plans to start construction on its Driftwood LNG export plant in
Louisiana in March 2022. 
    "We are aggressively pursuing upstream acquisitions," said
Charif Souki, co-founder and executive chairman of U.S. LNG
developer Tellurian. "There are plenty of targets in the
Haynesville that make sense."

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UPDATE 1-Oil output in U.S. Permian Basin to rise to 4.8 million
bpd in Nov. -EIA     urn:newsml:reuters.com:*:nL1N2RE20N
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 (Reporting By Jessica Resnick-Ault, additional reporting by
Arathy Nair and Shariq Khan in Bangalore, Scott DiSavino in New
York; Editing by David Gregorio)
 ((Jessica.Resnick-Ault@thomsonreuters.com; +1 332 219 1145;))