Private equity firm Tailwater Capital is deepening its roots in U.S. shale basins through an equity raise and several royalty acquisitions in prominent shale plays.

Tailwater Royalties Fund LP, an affiliate of the Dallas-based private equity firm, closed its fund with more than $100 million in capital commitments from new and existing limited partners.

Tailwater Royalties announced the company’s formation in January 2021 to grow Tailwater’s footprint in minerals and royalties across multiple North American shale basins. In mid-March, Tailwater Capital closed its royalty fund with about $105.4 million in proceeds, according to regulatory filings.

To that end, Tailwater Royalties recently announced it is scooping up 1,877 net royalty acres in the Permian Basin, Eagle Ford and Haynesville shales in a series of acquisitions.

Doug Prieto
Doug Prieto, CEO of Tailwater E&P. (Source: Tailwater)

Doug Prieto, CEO of Tailwater E&P LLC – which manages the royalties fund and non-operated funds alongside Tailwater – told Hart Energy the firm was comfortable with the breakeven costs and well control within those core shale basins.

“What we’ve tried to focus on here is going in and buying what we believe is the highest quality geology so that we can understand our returns within a band of outcomes, where we have great break-evens and we know that there’s going to be operator activity,” Prieto said.

The company declined to disclose its partnerships with operators. But Tailwater said it is working with high-quality operators in the Permian, Eagle Ford and Haynesville, said Prieto, who previously worked as vice president of land and midstream for Concho Resources until its sale to ConocoPhillips.

The firm wanted to acquire undeveloped inventory in the core shale basins through the mineral and royalty fund. But Tailwater also wanted to pick up assets that had some measure of existing production and a line of sight to greater production in the future.

“Being a yield-based strategy, we’ve got rigs running on the footprint today. We’ve got production in the door,” Prieto said.

Tailwater plans to deploy more capital from Tailwater Royalties Fund into attractive M&A opportunities.

While the royalty company Tailwater Royalties will consider further deals in the Permian, Eagle Ford and Haynesville, it will also consider making investments in the Williston Basin, the Denver-Julesburg Basin (D-J Basin) and the Midcontinent, Prieto said.

“We’ve not historically worked in California or the Marcellus or the Utica,” Prieto said. “We’ve focused in basins there in the core of the U.S.”

After raising $100 million for the first royalties fund, Tailwater plans to raise additional funds to pursue further mineral and royalty acquisitions.

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