Expand Energy (EXE) has agreed to acquire private asset-backed natural gas and power marketer Twin Eagle from Five Point Infrastructure for about $1.25 billion, becoming North America's leading gas marketer.
Twin Eagle, which was founded in 2010, markets more than 5 billion cubic feet per day of natural gas and manages about 44 billion cubic feet of storage capacity, the companies said in a joint statement Monday. It serves more than 1,000 customers across the US and Canada.
"This transaction accelerates Expand's evolution into a leading integrated natural gas company with a commercial and marketing advantage compared to peers," Expand Energy interim Chief Executive Michael Wichterich said in a statement. "By combining Expand's scale, resource depth and financial strength with Twin Eagle's marketing and optimization platform, we'll capture additional margin across the natural gas value chain and deliver more durable shareholder returns."
On a pro forma basis, Expand Energy expects the combined portfolio to have about 14 billion cubic feet per day of marketed volume. "The acquisition will broaden access to premium demand centers across the US and Canada, reaching approximately 90% of the natural gas market," the companies said.
In an emailed client note, Wedbush Securities said the transaction converts Expand Energy's upstream scale advantage into a "downstream commercial moat." Owning asset-backed marketing capabilities, along with the largest US gas supply base, should support more durable margins for the company, Wedbush analyst Michael Piccolo wrote.
"The more important signal is directional: (Expand Energy) is positioning itself as an integrated producer marketer ahead of accelerating (liquefied natural gas) and data center driven gas demand, a structural theme we would expect peers such as EQT (EQT) and Antero Resources (AR) to be evaluated against as investors reward integrated commercial capability over pure wellhead exposure," Piccolo said.
The transaction is initially projected to generate more than $200 million in annual earnings before interest, taxes, depreciation and amortization and deliver synergies of $150 million per year by the end of 2028, Expand Energy said. It expects $750 million of incremental free cash flow per year, representing a 50% increase from its previous target.
The deal, which requires approval from regulators, is expected to be completed in the third quarter.
"Together, with our new partner, we can create additional value in ways neither company could have accomplished on its own," Twin Eagle CEO Jeremy Davis said.
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