Mitsubishi is in talks to acquire Aethon Energy Management, the largest private natural gas producer in the Haynesville, for roughly $8B, according to the Wall Street Journal. If the transaction goes through, it would be the fourth major acquisition in the last year as industry players fight to secure valuable Haynesville reserves ahead of a near-doubling of US LNG export capacity over the next five years.
Last year Rockcliff, a portfolio company of Quantum Energy Partners, was acquired by Tokyo Gas subsidiary TG Natural Resources (TGNR) for $2.7B. TGNR is one of the largest producers on the East Texas side of the Haynesville, reporting 1.3 Bcf/d of gross production in 2023 from five Texas counties. Production totaled ~1.1 Bcf/d at YE24.
On March 31, TGNR acquired a 70% stake in Chevron U.S.A.’s (CVX) East Texas gas assets for $75MM in cash and $450MM in capital carry. That deal encompassed 71,000 net contiguous acres in Panola County, TX, mostly unexplored. CVX’s Haynesville acreage includes some of the few remaining undeveloped parcels in the region, allowing TGNR to develop the plot with ideal well spacing. The additional acreage extends TGNR’s drilling inventory beyond 20 years and supports Tokyo Gas’ strategy of bolstering its position in US shale near export facilities.
Also in March, hedge fund Citadel in March acquired E&P Paloma Natural Gas for $1.2B. Paloma is a midsized private operator, producing ~450 MMcf/d at the basin’s peak in 2023. Gas production declined to ~350 MMcf/d by YE24, according to data in East Daley Analytics' Energy Data Studio.
East Daley has called for over 10 Bcf/d of Haynesville growth in response to growing LNG demand on the Texas-Louisiana Gulf Coast in our Macro Supply & Demand Forecast. While this figure is within the physical capabilities of the basin, Haynesville producers seem reluctant to work through their inventory so quickly given the 20-year sales and purchase agreements (SPAs) US LNG projects have signed with offtakers. Aethon in particular has called for a $5/MMBtu price tag to kickstart any Haynesville production growth.
We are exploring scenarios in the Macro Supply & Demand Forecast where Haynesville growth is more constrained, though it is not clear that other basins can contribute adequate production or have sufficient egress capacity available to take a meaningful slice of the LNG demand pie.
Mitsubishi’s interest in Aethon comes as no surprise. Japanese companies represent a significant share of recent US LNG offtake agreements and are securing cheap reserves to support them. JERA has signed four new 20-year LNG offtake agreements totaling 5.5 Mtpa (see table). JERA also inked a 1.0 Mtpa SPA with Venture Global’s (VG) CP2 project in April 2023. Separately, Energy Transfer (ET) has entered into a 20-year SPA with Kyushu Electric Power to supply 1.0 Mtpa from its Lake Charles LNG project.
Japan for decades was the world’s largest LNG importer (China passed Japan in 2021). The LNG industry historically has designed projects around stranded gas reserves dedicated to exports. With their flexible cargoes and price-driven supply, US LNG projects disaggregated this supply chain. But by seeking to directly own the upstream reserves, these Japanese companies are replicating a familiar commercial model.
In EDA’s view, the interest from Mitsubishi and others supports our bullish thesis on Haynesville growth. Japanese companies don't have the same incentive as US producers to hold back supply and drive up gas prices, because they are also buying LNG indexed to Henry Hub. On the other hand, the Japanese government is encouraging energy importers to secure more long-term LNG agreements in response to projected power demand growth from AI and data center development, in which case extending the Haynesville’s inventory runway is in the country’s best interest. If Aethon is acquired by Mitsubishi, it would be a significant step in the ongoing process of globalizing natural gas markets. – Oren Pilant and Kritika Gaikwad Tickers: CVX, ET, VG.
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