EXCLUSIVE-Investment firm Aethon explores options for $10 billion US natgas assets, sources say

By David French

Nov 12 (Reuters) - U.S. energy-focused investment firm Aethon Energy Management is exploring options for its natural gas production and midstream assets that include a sale or an initial public offering at a valuation of about $10 billion, including debt, people familiar with the matter said on Tuesday.

The deal deliberations come as the boom in artificial intelligence and data centers is driving up demand for power, which in turn is boosting the prospects of gas producers. Roughly 42% of the U.S. power supply in 2023 was generated by burning gas, according to data from the U.S. Energy Information Administration.

Aethon is working with investment bankers at Goldman Sachs GS.N and Citigroup C.N to evaluate its options, the sources said, adding any transaction would likely happen in 2025.

The upstream assets of Aethon, which primarily focus on the Haynesville shale formation in Louisiana and East Texas, constitute one of the largest privately-held U.S. gas producers.

While the assets are owned and operated by Aethon, investment firms RedBird Capital Partners and Canada's Ontario Teachers' Pension Plan also hold sizable stakes.

If the assets are sold, it would add to the record-breaking wave of consolidation within the U.S. oil and gas industry over the past two years. Notable recent deals include EQT's EQT.N purchase of pipeline operator Equitrans Midstream, and the tie-up between Chesapeake Energy and Southwestern Energy that resulted in the formation of Expand Energy EXE.O.

The sources, who requested anonymity as the deliberations are confidential, cautioned that any deal is not guaranteed and Aethon could ultimately keep the assets.

Aethon, Citi, Goldman and RedBird declined comment. OTPP did not immediately respond to a comment request.

This is not the first time that Aethon has explored options for its assets. Reuters reported in 2022 that it was seeking buyers for its Louisiana assets, which represent the majority of the firm's upstream operations.

With production and pipelines located along the Gulf Coast, Aethon's assets also benefit from the growth of U.S. gas export capabilities. Last year, the U.S. became the largest exporter of liquefied natural gas $(LNG)$.

In May, Aethon struck a deal that could allow it to purchase two million metric tons per annum of LNG, while it simultaneously acquired Tellurian's upstream assets for $260 million. Tellurian and its Driftwood plant were subsequently sold to Woodside Energy WDS.AX.

Dallas-based Aethon was founded in 1990 by veteran oil and gas investor Albert Huddleston, and has over the years invested in energy assets across a number of U.S. shale basins.

Apart from its Haynesville assets, Aethon owns upstream facilities in Wyoming, with total company production at roughly 2.5 billion cubic feet per day in 2023, according to its website. Aethon also owns more than 1,400 miles (2,250 km) of pipelines across the same geographic footprint.

(Reporting by David French in New York; Editing by Anirban Sen and Marguerita Choy)

((davidj.french@thomsonreuters.com;))