Tokyo Gas’ acquisition of Castleton Resources to conclude
Japan’s Tokyo Gas (TG) will today finalise a $187 million deal that will see it assume control of Castleton Resources, a US shale gas operator.
TG will increase its stake from 46% to 70% by acquiring new shares from Castleton, which is seeking financing for the procurement of new assets in Louisiana. Accordingly, Castleton Resources will change its name to TG Natural Resources LLC by March 2021.
The historic deal—which marks the first purchase of a US shale operator by Japan’s largest gas utility—represents an auspicious convergence of long-term strategy and innate opportunism. Faced with increasing challenges at home due to an ageing population and liberalised energy market, TG charted a new roadmap in 2019 that envisioned an aggressive overseas expansion in renewables and liquefied natural gas projects. The pandemic-induced hydrocarbons price collapse and supply glut have likewise presented TG with a unique opportunity to expand its holdings.
Expect COVID-19 to spur a wave of consolidations in the short-term, especially within the US onshore space, which currently contains over 100 reputable firms. Nonetheless, companies may be reluctant to commit to larger mergers in the medium to long-term as they await the outcome of the 2020 presidential election. While a Trump continuation would boost the outlook for fossil fuels, a Biden administration would significantly complicate the existing regulatory environment by banning new oil and gas permissions and dampening the appeal of consolidations.
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