Business Essentials for Professionals


A Tokyo Gas Unit Is Nearing A $4.6 Billion Deal To Acquire A Natural Gas Producer In The US

A Tokyo Gas Unit Is Nearing A $4.6 Billion Deal To Acquire A Natural Gas Producer In The US
A unit of Tokyo Gas Co Ltd is in advanced stages of negotiations for acquiring US natural gas producer Rockcliff Energy from the private equity firm Quantum Energy Partners in a potential deal worth almost $4.6 billion, including debt, said a report published by Reuters quoting information from sources.
If completed, the acquisition would be the latest strategy by a Japanese company to ensure supply of gas from friendly countries, which has assumed significance as a strategy for Japan which is an import-dependent economy in terms of oil and gas following the Russian invasion of Ukraine which has rocked the global chain chain for oil and gas.  
The acquisition that will happen in all-cash with Houston-based TG Natural Resources, 70% of which is owned by the Japanese energy firm, is expected to be made public this month, according to sources who asked to remain anonymous because the discussions are private. The remainder of TG Natural Resources is owned by Castleton Commodities International (CCI).
TG Natural Resources is coordinating funding for the purchase from a variety of sources, which include banks and private credit providers, according to the sources, who warned that no deal was secured and that the discussions could finish without a deal.
Quantum and CCI did not respond to requests for comment. Requests for comment from Rockcliff and TG Natural Resources were not immediately returned. Tokyo Gas did not immediately respond to requests for comment.
The Haynesville shale formation, which stretches across Louisiana and East Texas, is used by Rockcliff to produce more than 1 billion cubic feet of natural gas per day. Quantum initially invested $350 million in the Rockcliff management team in 2015.
Purchasing Rockcliff would significantly expand TG Natural Resources' operations, with the company producing around 330 net million cubic feet per day from the Haynesville formation as of June 2022, according to its website.
The largest city gas supplier in Japan is in the midst of a portfolio reshuffle aimed at shifting resources to areas of growth. Tokyo Gas agreed in October to sell its stakes in four Australian liquefied natural gas (LNG) projects for $2.15 billion to a unit of the US investment firm EIG.
The Russian invasion of Ukraine has reduced gas supply flows to Europe, causing European countries to import record amounts of LNG cargoes, putting global supplies under strain and raising prices.
Japan, which lacks natural resources, has been working to diversify away from Russia's Sakhalin project, which accounts for 9% of Japan's total LNG imports of 74.3 million tonnes per year.
On December 28, Japanese companies signed several agreements to receive LNG supplies, including a preliminary agreement with Oman LNG that could last up to ten years and a 20-year agreement with US-based Venture Global.
Japan imported 7.1 million tonnes of LNG from the US in 2021, accounting for 9.5% of total imports.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc