Expand Energy agreed to buy the gas marketer Twin Eagle for $1.25bn, and raised its marketing cash flow target by half
Buying a gas marketer is a bet about the space between the wellhead and the customer.
Expand Energy made that bet on Monday morning. The company said at 07:00 ET that it has signed a definitive merger agreement to acquire Twin Eagle Holdings, N.A., LLC for $1.25 billion from Five Point Infrastructure, with the price subject to typical adjustments including working capital. It expects to close in the third quarter, once customary conditions and the required regulatory approvals are met, and to pay with cash on hand and borrowings under its revolving credit facility. No equity is being issued.
Twin Eagle is not a producer. Founded in 2010, it markets more than 5 billion cubic feet a day of natural gas, manages roughly 44 Bcf of storage and about 2 Bcf/d of firm transportation, and serves more than 1,000 customers across the United States and Canada. Its business, in Expand's description, spans wholesale marketing, asset management, structuring and analytics, logistics and market intelligence, and its earnings rest on recurring physical supply and delivery relationships rather than on the gas price.
Put the two together and Expand says the combined portfolio would carry approximately 14 Bcf/d of marketed volume, roughly 9 Bcf/d of firm transportation and 49 Bcf of storage, reaching approximately 90 percent of the natural gas market.
The financial claims are the company's own and are worth separating by date. Expand calls the transaction immediately accretive and expects it to contribute more than $200 million of projected annual EBITDA initially. It puts synergies at $150 million a year, and dates that to year-end 2028. The headline number is the third one: incremental free cash flow from the marketing and commercial strategy is now guided at $750 million a year, which the company says is 50 percent above its previous target.
"This transaction accelerates Expand's evolution into a leading integrated natural gas company," said Michael Wichterich, who signed it as Interim President and Chief Executive Officer. Jeremy Davis, Twin Eagle's President and Chief Executive Officer, thanked Five Point for a partnership he dated to the last dozen years. David Capobianco, Five Point's Chief Executive Officer and Managing Partner, said the firm had seen an opportunity to expand the platform and capitalize on growing demand for North American gas.
The word interim in Wichterich's title is the detail this desk would watch. A company without a permanent chief executive has committed $1.25 billion of cash and credit facility capacity and revised a multi-year cash flow target upward by half, and whoever takes the job permanently inherits both. Expand's release gives no timetable for that appointment, and this item makes no claim about one.
