Tailwater Capital announces third acquisition in under a month

Pipeline, Trunkline, Tailwater

By: Catherine Leffert – Dallas Business Journal – Tailwater Capital has announced several midstream acquisitions in the last month, utilizing a $1.1 billion fund it closed last spring.

The Dallas-based energy private equity firm most recently said it would acquire NorTex Midstream Partners, a Houston-based natural gas storage and transportation company. Financial details weren’t disclosed, but NorTex operates the largest portfolio of non-utility gas storage facilities in North Texas, per the release.

NorTex, a 60-year-old, independently owned company, will retain its Houston headquarters and management team. In Tailwater’s announcement, the firm said NorTex provided storage infrastructure strategically located to North Texas.

“With more intermittent renewable sources being added to the grid, thermal generation will be critical to delivering power at a moment’s notice during periods of renewable intermittency,” the release said. “NorTex is well-positioned to facilitate that call on thermal power generation in North Texas and service the critical infrastructure necessary to provide reliable electricity to the North Texas market.”

At the end of January, Tailwater said it would acquire Tall Oak Midstream III and a majority of Tall Oak Midstream II — pipeline operators both in Oklahoma, but servicing the Arkoma Basin and mid-continent, respectively —  in two separate transactions. Tailwater made the agreement to acquire Tall Oak II and Tall Oak III from EnCap Flatrock Midstream, a San Antonio-based midstream venture capital firm.

Tall Oak III will fold into Tailwater’s existing portfolio company, Connect Midstream, bringing in the Oklahoma-based pipeline company’s management team to run the firm’s platform. It runs more than 120 miles of pipelines in the Arkoma Basin. 

The Tall Oak II acquisition will allow Tailwater to operate most of the company’s assets, which consists of more than 750 miles of pipelines, though EnCap will retain some lines in Custer County, though in a new entity — the Oklahoma STACK Gathering System, managed by the Tall Oak team. Tall Oak was founded in 2014 and offers natural gas gathering, compression, treating and processing, among other things.

When Tailwater announced its sixth fund close last spring, the Founders Jason Downie and Edward Herring said they were prepared to be patient to deploy capital, adding it was a “timing game.”

Tailwater currently has $3.7 billion in committed capital under management, including its most recent $1.1 billion fund, and has completed more than 100 transactions in the upstream and midstream sectors for more than $20 billion in transaction value, according to its website.

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