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Potential Deal for $5 Billion: Tug Hill and Quantum Energy Seek Sale

Undisclosed industry sources said that THQ Appalachia I LLC (Tug Hill and Quantum Energy) is seeking a sale of the U.S. natural gas producer for more than $5 billion, including debt.

To run the sale process, which kicked off earlier this month, an investment bank has been hired for the company backed by Tug Hill Operating and private equity firm Quantum Energy Partners.

Mainly operating in the Marshall and Wetzel counties in West Virginia, THQ Appalachia has net production of around 760 MMcf/d.

Despite volatility in commodity markets which has made the valuation of energy producers tougher, THQ Appalachia is anticipating more than $5 billion due to the worth of its existing production and the possible value of its undeveloped acreage, the sources said on June 17.

Tug Hill Operating is a privately held, independent oil & gas exploration company focused on drilling and producing oil and clean-burning natural gas in the continental United States.

Tug Hill Operating plans to continue to grow in these areas through select strategic acquisitions and leasing efforts. Moreover, the company maintains an extensive non-operated asset position in Northeast Pennsylvania in the tier 1 Marcellus where Tug Hill or its team have drilled and/or participated in over 850 wells since 2007.

The company focuses on operational and detailed analysis, with all decisions underpinned by deep technical and financial evaluation. The senior team has acquired, operated, developed, and managed E&P assets in nearly every major US Domestic basin and has a proven track record of managing large-scale assets.

Founded in 1998, Quantum Energy Partners is a leading global provider of private capital to the responsibly sourced energy and energy transition & decarbonization sectors, what we call the Sustainable Energy Ecosystem. Quantum Innovation Fund invests in transformative technology-based businesses focused on the energy and sustainability sectors. It can provide early-stage companies with differentiated strategic insights and access. The company has significant experience coaching and mentoring founders to “cross the chasm” and build businesses of significant scale.

Additionally to purchasing THQ Appalachia, possible bidders in the sale process also have the opportunity to buy XcL Midstream, the pipeline firm that moves the company’s gas to market and has the same CEO as in Tug Hill. If the same buyer chooses to purchase XcL, the deal consideration will increase further.

However, the anonymous sources admitted that the sale depends on the market conditions and is not guaranteed since Tug Hill and Quantum could ultimately decide to retain some or all of THQ Appalachia and XcL’s assets. Tug Hill and Quantum refused to comment on these statements and XcL did not respond to a comment request.

Meanwhile, in June U.S. natural gas futures traded at their highest level since 2008. The high commodity price levels are inspiring longstanding owners of privately-held gas producers to explore sales.

If you are further interested in finding more information about the deals in the Appalachian basin or about upstream/midstream M&As companies and their assets, please, contact our Houston sales office or SCHEDULE A DEMO to learn how Rextag can help you leverage energy data for your business. Tel. +1 713-203-3128 Email: treitmeier@hartenergy.com

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Earthstone Expands Due to Acquisition of Titus’ Delaware

Earthstone Energy Inc., based in Texas, announced the transaction on June 28: the acquisition of Titus Oil&Gas which will raise production in the Delaware Basin by 26%. The $627 million acquisition fills the Permian Basin in Eddy and Lea counties, N.M. with 86 net locations on 7,900 net acres of leasehold, while it is not clear how much of the leasehold might be on federal acreage It is Earthstone’s seventh acquisition since 2021, a span that includes the closing of approximately $1.89 billion in acquisitions in the Permian Basin. The purchase of Titus Oil & Gas Production LLC and Titus Oil & Gas Production II LLC, privately held companies backed by NGP Energy Capital Management LLC, is estimated at $575 million in cash and it is the equivalent of $52 million in stock (3.9 million shares of its Class A common stock based on the June 24 closing price). Titus shared that its net production in June was 31,800 boe/d. The company had reserves of approximately 28.9 MMboe. Earthstone is sure its net production will increase, at the midpoint, by 20,500 boe/d (65% oil) in the fourth quarter.

On 27 June, the analysts at Kpler spread the word that the exports of crude oil from the U.S. Gulf Coast could break a record 3.3 MMbbl/d this quarter as Europe has regard to U.S. crude which can outweigh sanctioned Russian oil. Due to Washington's decision to release 180 MMbbl of oil from the nation's Strategic Petroleum Reserve, U.S. exports have increased in the last three months, as it has flooded the domestic market. Exports to Europe are anticipated averaging approximately 1.4 MMbbl/d this quarter, about 30% higher than the year-ago quarter, meanwhile, export to Asia is set to decrease to less than 1 MMbbl/d. Despite that the U.S. has lost about 1 MMbbl/d of refining capacity since 2020, it also boosted exports thanks to the government’s intervention to back crude supplies which has had consequences in growth in exports. Throughput via the Port of Corpus Christi has grown by more than 150,000 bbl/d and has become 1.86 MMbbl/d. Nevertheless, Port of Houston exports also have been increasing since the third quarter of last year, they remain below pre-pandemic levels.

Enbridge acquired Tres Palacios natural gas storage facility in Texas for $335 million, adding approximately 35 Bcf of natural gas storage to their portfolio. The facility uses salt caverns for storage and has a gas header pipeline system that spans 62 miles and links to 11 major gas pipelines. Crestwood Equity Partners LP intends to divest its interests in Tres Palacios by the second quarter.

The U.S. natural gas pipeline network is a complex system of pipelines that transport natural gas from production areas to consumers across the country. The pipeline network consists of three main types of pipelines: gathering pipelines, transmission pipelines, and distribution pipelines. Gathering pipelines are small-diameter pipelines that transport natural gas from production wells to processing facilities or larger transmission pipelines. Transmission pipelines are large-diameter pipelines that transport natural gas over long distances, sometimes across multiple states. Distribution pipelines operate at low pressure and are located in or near urban areas. They are often referred to as "utility pipelines" because they are typically owned and operated by local gas utility companies.

Diamondback Energy, an independent oil and gas company, has successfully completed the acquisition of Lario Permian, marking the closure of two major deals in the fourth quarter of 2022. The company purchased two private operators in the Midland Basin for approximately $3.3 billion.

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