(Kriztian Bocci/Bloomberg)
key takeaways:
- Expand Energy agreed to buy gas marketer Twin Eagle Holdings for $1.25 billion, expanding its marketing and trading business before closing in the third quarter.
- Expand has raised its annual marketing and commercial free cash flow target by 50% to $750 million as demand for U.S. gas grows from LNG export data centers and power.
- The company will fund the deal with cash and debt borrowings, while analysts said the price was high but strategically aligned.
Expand Energy Corporation agreed to buy gas marketing company Twin Eagle Holdings NA from private equity firm Five Point Infrastructure for $1.25 billion, giving the largest U.S. natural gas producer a lead in marketing and trading.
The acquisition will make Expand Energy a leading gas marketer, the company said in a statement on July 27. The company has increased its target of annual free cash flow from marketing and commercial by 50% to $750 million, the company said in a statement on July 27.
The transaction, which will help Expan reach customers in the key markets of the US and Canada, is expected to close in the third quarter.
The deal reflects an effort by gas producers to gain a greater share in the value chain as US demand increases.
Rather than simply selling gas at the wellhead, Expand is betting it can earn higher and more stable returns by marketing it more directly to customers, managing transportation and storage, and optimizing flows to North American markets as demand for LNG exports, data centers and power surges.
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Shares of Expand fell about 1% before the start of regular trading in New York. The company expects to pay for the transaction through cash on hand and borrowings from its revolving credit facility.
“This is a bit expensive for trading and marketing businesses, which typically sell at lower prices,” Roth analyst Leo Mariani said in a note July 27. “However, we feel this acquisition is a good strategic fit for the company.”
Expand, formed through the 2024 combination of Chesapeake Energy and rival Southwestern Energy, is building out its in-house trading team in an effort to improve margins and avoid outsourcing sales to middlemen. The company is hiring from ExxonMobil Holdings Corp. Several former gas traders at the Texas oil giant left Xpend last year after Dan Turco, Xpand’s executive vice president of marketing and commercial, joined from ExxonMobil last year.
Expand netted $91 million on its marketing in the first quarter, when a major winter storm sent gas prices soaring.
