Houston-based Summit Midstream Corp. (SMC) will buy Tall Oak Midstream III in a cash-and-stock deal worth approximately $450 million, Tall Oak’s portfolio partner Tailwater Capital announced Oct. 1.
Tall Oak’s assets include a gathering and processing system in the Arkoma Basin in Arkansas and Oklahoma. The company has two 220 MMcf/d natural gas processing plants and 411 miles of gas-gathering lines.
The deal shifts Summit’s commodity exposure to a more equal weight of oil and natural gas as the company prepares for growing natural gas demand in the next ten years, said SMC President, CEO and Chairman Heath Deneke in an announcement of the deal.
“The Tall Oak system in the Arkoma Basin is well positioned, similar to our existing Barnett asset, to help satisfy that demand growth with access to the Gulf Coast, Mexico and key power generation markets."
As per the deal, Summit will fund the acquisition with $155 million in cash and stock representing approximately 40% ownership in Summit, broken down into about 7.5 million shares of Summit Class B common stock and common units of Summit Midstream Partnership, a wholly-owned subsidiary of SMC.
The deal also includes up to $25 million contingent consideration in cash over certain measurement periods through March 2026, according to Tailwater’s announcement.
For SMC, the transaction has a value accretive acquisition multiple of an estimated 5.6x 2025 asset-level adjusted EBITDA.
The deal is expected to close by the end of 2024.
Upon closing, four directors chosen by Tailwater Capital will serve on the pro forma Summit Board.
Lewellyn said in the announcement that he planned to work with Tailwater Capital again in future Tall Oak projects.
"Our entire Tall Oak team has done an exceptional job delivering high-quality service while prioritizing reliability and safety, and I am confident that the Summit team will continue to execute and capitalize on new and exciting opportunities in the Arkoma Basin," said Ryan Lewellyn, Tall Oak president and CEO in the announcement.
Tailwater Capital had a busy Oct. 1. On the same day of the Tall Oak deal’s announcement, the company also announced that it had purchased non-op working interests across 5,000 acres in the Permian Basin for an undisclosed amount.
Recommended Reading
OMV Makes Gas Discovery in Norwegian Sea
2024-08-26 - OMV and partners Vår Energi and INPEX Idemitsu discovered gas located around 65 km southwest of the Aasta Hansteen field and 310 km off the Norwegian coast.
Chevron Boosts Oil, NatGas Recovery in Gulf of Mexico
2024-09-03 - Chevron’s Jack/St. Malo and Tahiti facilities have produced 400 MMboe and 500 MMboe, respectively.
Interoil to Boost Production in Ecopetrol Fields
2024-09-03 - Interoil will reopen shut-in wells at three onshore fields, which are under contract by Ecopetrol.
Seadrill to Adopt Oil States’ Offshore MPD Technology
2024-09-17 - As part of their collaboration, Seadrill will be adopting Oil States International’s managed pressure drilling integrated riser joints in its offshore drilling operations.
Permian Resources Closes $820MM Bolt-on of Oxy’s Delaware Assets
2024-09-17 - The Permian Resources acquisition includes about 29,500 net acres, 9,900 net royalty acres and average production of 15,000 boe/d from Occidental Petroleum’s assets in Reeves County, Texas.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.