Jordan Blum, editorial director, Hart Energy: This is the OGInterview and I'm joined by Craig Jarchow, the president and CEO of TG Natural Resources. Thank you so much for joining us. We really appreciate it.
Craig Jarchow, president and CEO, TG Natural Resources: Well, thank you for having me.
JB: So shale industry has been awash in consolidation of late, including in the Haynesville region. You just had Chesapeake Energy acquire Southwestern Energy, and it hasn't gotten as much attention, obviously. But really equally importantly, TG has just acquired Rockcliff Energy, expanding greatly into the East Texas region adjacent to Louisiana. Can I get you to just elaborate on how big a deal this is, what it means for TG and what's going on with consolidation right now?
CJ: It's a very important acquisition for us. We've been at it for a while now. We're backed by Tokyo Gas as one of our investors and Castleton Commodities International as the other. We built the company through a series of acquisitions. This is the latest one. It's the biggest, it's $2.7 billion—that’s public information. And it really is transformational for us in that it takes us into the big leagues, so to speak, among Haynesville producers. The Haynesville is still a very competitive basin with Chesapeake and Southwestern announcing their deal—you have Aethon, you have Comstock, and a number of other companies. So the basin is consolidating and we're part of that. And with this deal we acquire additional scale, which is important for getting our costs down, but it's still a very competitive place to do business.
JB: So obviously the Haynesville region has had this kind of second boom along with the LNG export boom. The White House—or the Department of Energy that is—recently announced a bit of an LNG pause on permitting. Can I get your take on just kind of how big a deal, or isn’t this?
CJ: Near term? It's not such a big deal because this applies to facilities, projects that have yet to be permitted. And of course the number of projects are already online, and what's online now, if you just look at the Gulf Coast accounts for about 11.4 Bcf a day or more, and if you look at those facilities that are not yet online but are permitted, that's another, call it 9.8 Bcf a day. So there's still going to be, and already is, quite a bit of offtake. So in the near term through, call it 2027, 2028, not a big effect, but for the facilities that were planned, not yet permitted for 2027 and beyond, they will be impacted. They will be delayed, and who knows for how long, but there's still a lot of offtake capacity built, and will be built.
JB: Yeah, so there's a lot of new projects still coming online, obviously, like you said, but maybe there's that so-called ‘chill’ in investment.
CJ: Whenever you have a decision like this by policymakers, investors have to take that into account. And although this particular decision may be short-lived, we'll see, any investor will take that into consideration when deciding whether or not to fund the development pre-permit stage, which can be a lot of money, whether or not they want to take that risk, and that risk will have to be priced into their returns analysis.
JB: So I know the natural gas sector is essentially growing along with the LNG sector in the U.S. Can I get you to elaborate on just why LNG is so critical right now in these geopolitical times from Ukraine to Gaza to what's going on in the Suez Canal?
CJ: Yeah. Well, the nice thing about U.S. natural gas is because we are such a competitive business and because of the technological breakthroughs and operational knowhow, we're able to supply natural gas at very low prices. Today, the prompt-month pricing is approaching $2 per MMBtu, which is quite low, and that's beneficial to the off-takers, the buyers, and it's a secure source of supply. So if you're in Europe, if you're in Asia, of course our big investor is Tokyo Gas. They're a big buyer of LNG into Japan. Buying natural gas from LNG facilities based in the U.S. is a good proposition. It's low cost natural gas, security of supply, political risk is low. It's just a good place to do business.
JB: Very good. Just circling back, one last question on Rockcliff again. What is the opinion on just kind of why those assets are so valuable kind of on the East Texas side, maybe just outside of the core of the core of the Haynesville?
CJ: Yeah, the core of the core, as you'd say, has been designated, delineated in northern Louisiana in days gone by. And the Rockcliff team, to their credit, recognized that very good rock exists on the East Texas side, very close to the Louisiana border. It's not that far from the core of the core right next door. And they've developed the drilling technologies, the completion recipes to make this rock work really equally as well. And to their credit, they figured that out and we're the beneficiaries of that. So we're very excited about the quality of this inventory. We have nearly a century in rig years of drilling locations, so we'll be at it for a long time and we're very pleased we're the beneficiaries of what they did.
JB: Very good. Well congrats on the deal. And thank you for joining us for the OGInterview. To read and watch more, please visit online at hartenergy.com.
