Buyers Scramble for Their Slice of the Haynesville
A natural gas demand wave approaches, but there’s precious little left in the market to buy in the coveted Haynesville Shale.
Already the fourth-largest Haynesville gas producer and the largest producer on the East Texas side of the basin by year-end 2024, TG Natural Resources announced an acquisition of 70% of Chevron’s East Texas assets in April. (Source: TG Natural Resources)
Time will tell whether it’s really the “golden age of natural gas” or a short-lived race to the bottom for U.S. gas producers.
Bulls point to a looming wall of demand, mostly from new LNG projects but also from data centers, AI and power generation.
Producers are staying relatively cautious, with few operators in a hurry to drive production way up—and prices back down.
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For now, forward prices are constructive for U.S. gas producers. Henry Hub futures prices average about $4.60/MMBtu over the next 12 months as of mid-April, per CME Group data; the 24-month strip is $4.41/MMBtu.
The recovery in prices has helped fuel billions of dollars in natural gas-weighted M&A in recent months.
Deals are getting inked for shale gas in the Haynesville Shale, the Midcontinent and Appalachia. Experts say there’s more dealmaking to come, with several large packages exploring sales.
A billionaire buys in
Haynesville gas stands out from the pack for its nearness to the expanding U.S. LNG export complex on the Gulf Coast.
But the Haynesville play is relatively locked up in the hands of a few large players, compared to less consolidated plays like the Permian or Eagle Ford.
The Haynesville’s top five operators own more than a 70% market share in the basin, making it the second-most consolidated shale play in North America, according to a Kimmeridge analysis from last year. Only the Denver-Julesburg (D-J) Basin is more consolidated.
Data from Enverus Intelligence Research show the list of sizable Haynesville producers is quite short.
The fervor for Haynesville gas is attracting unlikely new faces.
Hedge fund giant Citadel made a $1.2 billion acquisition of private Haynesville E&P Paloma Natural Gas in February, Hart Energy first reported. The deal included around 60 undeveloped Haynesville locations on the Louisiana side of the basin.
The midsized operator, backed by private equity firm EnCap Investments, produced around 450 MMcf/d at the basin’s peak in 2023, according to East Daley Analytics.
Paloma produced about 382 MMcf/d (gross) in 2024, Louisiana state production data show.
Citadel did not operate any rigs in 2024 amid low commodity prices but has added two rigs this year as prices improved, East Daley said.
Paloma is the 10th largest Haynesville producer, according to Enverus data.
Miami-based Citadel, led by hedge fund billionaire Ken Griffin, was an unexpected buyer of Haynesville upstream assets. However, the firm has emerged as a force in natural gas trading in a market typically owned by merchants, producers and utilities.
Citadel’s commodities business generated around $4 billion of profit last year, driven by natural gas trading, Bloomberg reported.
A lack of domestic resources has forced Japanese leaders to scour the globe for reliable energy supply.
The Kenai LNG plant in Alaska, first operational in 1969, sends gas from Alaska’s Cook Inlet primarily to Japan. Kenai was the only LNG export facility operating in the U.S. for over 40 years.
The first LNG terminal in Asia that accepted the initial Alaska gas cargoes—the Negishi LNG regasification terminal—was built by Japanese utility Tokyo Gas, which still operates the plant.
But Tokyo Gas’ global gas strategy has continued to evolve, pushing the firm into owning upstream U.S. production.
Nearly a decade ago, Tokyo Gas acquired a 30% stake in Castleton Commodities International. Castleton is backed by family office capital, including Walmart’s Walton family, and originally launched as a subsidiary of the Louis Dreyfus Group.
Castleton had started consolidating a small East Texas position before going all-in with a $1.03 billion acquisition of Anadarko Petroleum’s Carthage assets. Castleton’s portfolio grew to around 160,000 net acres.
So, Castleton kept making East Texas acquisitions. And Tokyo Gas, encouraged by Castleton’s results, kept upping its stake in the upstream producer.
In 2021, Castleton changed its name to TG Natural Resources (TGNR) and Tokyo Gas boosted its ownership to over 90%. Today, Castleton owns 7% of the firm.
TGNR had grown into the fourth-largest Haynesville gas producer and the largest producer on the East Texas side of the basin by year-end 2024. But it wasn’t done growing.
As morning trading resumed in Tokyo on April 1, Tokyo Gas announced it was entering a $525 million acquisition of 70% of Chevron’s East Texas assets. Chevron will retain a 30% non-operated stake in the joint venture.
“Chevron expects to maintain future upside through the joint venture structure while accelerating development of a non-core asset through a capital efficient approach,” the company said.
The transaction was the result of year-long negotiations for what experts consider to be the last block of undeveloped Haynesville inventory: approximately 71,000 net contiguous acres, all in Panola County, Texas.
TGNR plans to end the year with 20 years of Haynesville drilling runway, President and CEO Craig Jarchow said in March at Hart Energy’s DUG Gas Conference & Expo in Shreveport, Louisiana.
Supermajor Exxon Mobil has a massive U.S. unconventional portfolio increasingly focused on the Permian Basin. Exxon’s $60 billion acquisition of Pioneer Natural Resources last year cemented it as the Permian’s top oil producer.
But Exxon still owns several legacy unconventional assets picked up through its $36 billion XTO Energy acquisition in 2010.
Exxon’s assets in the Williston Basin, which produced over 100,000 boe/d last year, are reportedly on the chopping block. The company still has assets in the Oklahoma Ardmore Basin, the Eagle Ford Shale and in Appalachia.
“Maybe other than the D-J, we’re pretty much active in all the basins,” Liam Mallon, longtime president of Exxon Mobil Upstream, told Oil and Gas Investor last year before his retirement.
Exxon also still quietly holds hundreds of undeveloped Haynesville and Cotton Valley drilling locations in East Texas and northern Louisiana, researchers say.
Novi Labs said there are an estimated 550-plus 2-mile locations left in the play where Exxon will likely be the operator. These are estimated operated locations, not net or gross locations.
Exxon still has hundreds of undeveloped Haynesville and Cotton Valley locations in East Texas and northern Louisiana. (Source: Novi Labs)
With natural gas prices rising and Haynesville drilling poised to increase, questions remain about how Haynesville and Cotton Valley fit into Exxon’s Permian-focused shale portfolio.
The assets date back to before the Haynesville Shale had even become headline news. XTO acquired the East Texas and Louisiana properties through a $4.2 billion acquisition of Hunt Petroleum in 2008—which signaled a curtain call for a large portion of the Hunt family oil dynasty.
Hunt brands owned by other Hunt family branches, including Petro-Hunt and Hunt Oil, continue to operate.
At the time of the XTO sale, around 70% of Hunt’s reserves were in East Texas and northern Louisiana. Hunt’s assets included 65,000 acres in San Augustine, Shelby, Panola, Nacogdoches and Harrison counties, Texas, and in DeSoto and Caddo parishes, Louisiana.
Hunt primarily targeted the traditional East Texas Cotton Valley, Travis Peak and James Lime formations.
It was during Hunt Petroleum’s data-room process that Chesapeake Energy announced discovering the “mother lode” in the Haynesville, so XTO didn’t pay for the deeper inventory, XTO CEO Keith Hutton said in a 2009 OGI interview.
“We paid for the normal Cotton Valley sand and Travis Peak-type production,” he said. “The wild card that makes this a big home run is the deep pay—the Haynesville and the Cotton Valley lime.”
At that time, XTO estimated that the Hunt acreage would support more than 800 wells on 80-acre spacing. Reserve estimates were some 1.5 Tcfe of upside just from the East Texas and Louisiana properties alone.
They are relatively attractive locations with a $3.70/Mcf breakeven price to generate a 25% return, according to Novi Labs. They’re also higher quality locations than even the Chevron inventory TGNR acquired in April.
Exxon generally holds higher quality Haynesville inventory than TGNR and Chevron that can be developed at a lower Henry Hub price. (Source: Novi Labs)
Where Chevron is in Panola County, the basin begins to come up onto the Strickland high and Overton shoal. The basin shallows, organic matter drops, pressure declines and well economics deteriorate, said Novi Labs’ Head of Research Brandon Myers.
“This is why the best part of the Chevron acreage is closer to the [Louisiana border],” he said.
Exxon hasn’t actively developed its Haynesville property in years. It most recently turned a horizontal gas well to sales in Nacogdoches County in October 2021.
The 5,900-ft lateral landed in Haynesville at a vertical depth of 12,525 ft, according to Railroad Commission of Texas data.
With Exxon’s long-awaited Golden Pass LNG plant starting up this year, could it hang onto coveted Haynesville locations? Or could Exxon prune another non-core asset from its unconventional portfolio through a sale?
Exxon declined to be interviewed for this story.
Exxon’s U.S. gas output averaged 3.26 Bcf/d in the fourth quarter, up from 3.14 Bcf/d sequentially, the company reported in February earnings.
Searching for sticks
A lot of buyers want a piece of Haynesville’s pie. Unfortunately, there’s less and less of the Haynesville available to buy.
The list of likely Haynesville sellers is short and quickly getting shorter.
Privately held Aethon Energy, the Haynesville’s second-largest producer, continues to explore its options. The company is rumored to be for sale or pursuing an IPO in the range of $10 billion.
But Aethon is so large that it could be difficult for a larger producer to acquire and digest, some M&A experts say.
Formerly public EXCO Resources still owns considerable undrilled Haynesville inventory, according to Novi Labs. After restructuring through the Chapter 11 process, EXCO emerged as a privately held firm in 2019.
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