Osaka Gas Co. Ltd. agreed on July 29 to buy Houston-based independent Sabine Oil & Gas Corp. as the Japanese company looks to U.S. shale for growth.

The transaction, which still requires government approvals, will mark the first time a Japanese company has purchased a U.S.-based shale gas developer, Osaka Gas said in its release.

Sabine, formerly a publicly-traded E&P which emerged as a private company after filing for bankruptcy in 2016, operates in the Haynesville and Cotton Valley shale plays in East Texas. According to a report by Reuters, the sale of Sabine is worth $610 million.

The acquisition of Sabine includes an acreage position in East Texas, which Osaka Gas had acquired a 35% interest in for about $144.5 million last year. Since acquiring its stake in Sabine’s East Texas position, Osaka said: “The wells have been producing more than expected volumes, generating stable cash flow.”

Sabine’s position totals 175,000 net acres and about 1,200 wells in Harrison, Panola, Rusk and Upshure counties, Texas. Production from the acreage is 210 million cubic feet equivalent per day of shale gas, according to the company release.

Sabine Oil & Gas East Texas Asset Map (Source: Sabine Oil & Gas Corp.)
Sabine Oil & Gas East Texas Asset Map (Source: Sabine Oil & Gas Corp.)

Osaka Gas said the acquisition of Sabine will support its long-term goal to expand its global energy businesses “along the energy value chain from upstream to mid- and downstream business including LNG trading.”

In the U.S., Osaka Gas’ core businesses comprise the Sabine shale gas project, Freeport LNG and independent power producer (IPP) projects.

Under its long-term business strategy, Osaka Gas plans to boost its earnings from overseas to account for one-third of its total recurring profit in the business year to March 2031, up from 9% in the year ended March this year, according to the report by Reuters.

Vinson & Elkins advised Osaka Gas on its acquisition of Sabine, led by partner Shay Kuperman with assistance from associates Josh Rocha and Tara Tegeleci. Meanwhile, Hunton Andrews Kurth LLP represented Sabine.

Emily Patsy can be reached at epatsy@hartenergy.com.

Onshore