![](/sites/default/files/styles/hart_news_article_image_640/public/image/2019/02/jarchow-2.jpg?itok=05u14IYC)
Craig Jarchow, president and CEO of Castleton Resources LLC, speaks to attendees at the recent DUG Haynesville conference in Shreveport, La. Source: Hart Energy
SHREVEPORT, La.—“The biggest East Texas producer you’ve never heard of” has some top-tier private partners that will help it achieve success, according to its president and CEO.
Craig Jarchow with Houston-based Castleton Resources LLC told attendees at Hart Energy’s first DUG Haynesville conference Feb. 21 his firm enjoys “upside that we didn’t pay for” on its East Texas acreage—as well as the ready capital to exploit the resource.
Currently, Castleton produces 253 million cubic feet of gas equivalent per day—72% natural gas—from 2,700 gross wells on 163,000 net acres. Proved reserves at year-end 2017 were 1.5 trillion cubic feet equivalent. The company also has a significant in-house midstream operation with 786 miles of high- and low-pressure gathering pipelines, as well as water handling and gas condensate assets.
In addition to “overperformance” in the Hayesville, including a doubling of its location inventory, Castleton has opportunities to redevelop the conventional Cotton Valley play and other behind-the-pipe reserves, he said.
Financially, the company projects 2018 EBITDA of $220 million, he added.
“If you want to know something about a company, the key is to find out something about their investors,” Jarchow said. Its owners—Castleton Commodities International LLC (CCI) and Tokyo Gas—are major players in the worldwide energy business. CCI, a major international commodities trader, holds a 70% interest and Tokyo Gas.
“Castleton is the former Louis Dreyfus [Energy],” he added, which was taken private in 2012 by a group of 25 “blue chip family offices… It’s long-term, private capital.” Castleton is “trading on virtually every gas pipeline in North America,” Jarchow said.
For its part, Tokyo Gas “is one of the biggest players in LNG and the biggest gas utility in Japan,” he said, noting the firm imports an average the LNG equivalent of 1.8 billion cubic feet of gas per day. It has investments in the Cameron and Cove Point LNG projects, as well as interests in Eagle Ford producers—and Castleton Resources.
“We think we have a real advantage. We think this is the future, not only in the Haynesville but in upstream oil and gas,” he said of the firm’s private investors. He noted there are multiple giant firms that have never gone public, including energy-focused Koch Industries and Hunt Oil; Cargill in food, drink and tobacco; and power-generator Tenaska.
“Why is that? It’s because there’s just a ton of private capital out there and you can grow a company to scale. That’s what we’re doing in the upstream space,” Jarchow added, at a time when the public capital markets have been essentially closed to oil and gas producers.
“Our source of equity is open,” he said. “Access to material, long-dated private capital is no longer a hindrance to building a large independent. Indeed, with the public equity markets closed to upstream companies, access to this capital is an advantage.”
He noted there has been a fundamental change in the New York Stock Exchange (NYSE) and other public markets in recent years as investors have moved to mutual funds, exchange traded funds and other investments vehicles. The bulk of daily volume is program and automate trades. Jarchow estimated that only 10% of the daily volume on the NYSE now comes from active analysts and investors who do research, meet with firms and pick stocks.
“You have to be really big to get their attention,” he added.
The strong private equity backing enabled Castleton to acquire the Carthage acreage formerly held by Anadarko Petroleum Corp. in 2016 for $1 billion through a bank syndicate. “We had $1 billion show up for a $560 million borrowing base, so we were 85% oversubscribed,” he noted.
Paul Hart can be reached at pdhart@hartenergy.com.
Recommended Reading
Darbonne: ‘The Dance’ of US Policy Leaving Energy Mid Slip
2024-08-30 - The 1909 Matisse painting known as “The Dance” demonstrates the outcome of one of the U.S.’ pillars falling down.
Analyst: US NGL Market Tightens Links to Crude, NatGas Production
2024-08-30 - A boost in propane and ethane development is tied to the opening of the Matterhorn Pipeline in the Permian, evidence of the increasingly closer link between different sectors of the energy industry.
Bakken Pipeline’s Oil-to-NGL Switch Could Prove Costly
2024-08-30 - Kinder Morgan’s challenge to ONEOK over Bakken NGL could upset the market’s balance.
Libya's Oil Output Falls More Than Half Due to Political Standoff
2024-08-29 - More than half of Libya's oil production, or about 700,000 bbl/d, was offline on Aug. 29 and exports were halted at several ports as a standoff between rival political factions over the central bank and oil revenue threatens to end a four-year period of relative peace.
Study: Global Gas Supply Not Keeping Up with Demand
2024-08-28 - Without significant growth in natural gas supply and infrastructure, the world will come up a fifth short of the supply needs, according to the International Gas Union.