Chevron has closed on a transaction to sell a 70% interest in its East Texas gas assets to an affiliate of TG Natural Resources (“TGNR”), a company indirectly owned by Tokyo Gas and Castleton Commodities International (“CCI”), for $525 million, with $75 million paid in cash and $450 million as a capital carry to fund Haynesville development. Chevron will retain a 30% non-operated working interest in a joint venture with TGNR and an overriding royalty interest in the assets. Tokyo Gas and CCI own an approximate 93% and 7% interest in TGNR, respectively.

The transaction is anticipated to generate over $1.2 billion in value to Chevron at current Henry Hub prices through the multi-year capital carry, retained working interest, and overriding royalty interest. Chevron expects to maintain future upside through the joint venture structure while accelerating development of a non-core asset through a capital efficient approach.

This transaction supports Chevron’s previously announced plans to divest $10-15 billion of assets by 2028 in order to optimize its global energy portfolio.

With this transaction, TGNR will add over 250 gross locations to its existing Haynesville inventory (assuming four wells per section). This will extend TGNR’s inventory life beyond 20 years at the current development pace, not counting the Bossier and Cotton Valley plays which are commercial at current prices. The Haynesville acreage in this transaction is relatively undrilled and held by shallower production, allowing parent-child effects between wells to be mitigated.

Craig Jarchow, CEO of TGNR said, 
“We are excited to partner with a world-class company like Chevron on this transaction. There is considerable operational overlap between the Chevron acreage and the legacy TGNR acreage, which will allow TGNR to realize synergies of over $170 million during the development of the asset.”

TGNR is one of the largest producers in the Ark-La-Tex region of East Texas and Northern Louisiana. 

KeyFacts Energy: Chevron US country profile   l   KeyFacts Energy: Acquisitions & Mergers news