Summit Midstream Corp. and its wholly owned subsidiary, Summit Midstream Partners LP, agreed to acquire Tall Oak Midstream Operating LLC and its subsidiaries from an affiliate of Tailwater Capital LLC for about $450 million.
Tall Oak is a large-scale gas gathering and processing system in the Arkoma basin in Oklahoma comprised of two 220-MMcfd natural gas processing plants (total 440 MMcfd processing capacity) and about 244 miles of low-pressure natural gas gathering lines, 167 miles of high-pressure natural gas gathering lines, and 65,000 horsepower of field and plant compression.
In a release Oct. 1, Heath Deneke, president, chief executive officer, and chairman of Summit Midstream, said the deal shifts the company’s commodity exposure “to a more equal weight of oil and natural gas-oriented drilling, particularly as we expect natural gas demand to grow considerably over the next decade.”
Tall Oak’s system in Arkoma basin “is well positioned,” Deneke continued, “similar to our existing Barnett asset, to help satisfy that demand growth with access to the Gulf Coast, Mexico, and key power generation markets.”
Pursuant to the terms of the definitive agreements, Summit will acquire 100% of the membership interest in Tall Oak Midstream for $155 million upfront cash consideration, and about 7.5 million shares of a combination of SMC Class B common stock and a corresponding number of common units of Summit Midstream Partners, representing about 40% ownership in the pro forma company.
In addition, Summit will pay $25 million contingent consideration in cash over certain measurement periods through Mar. 31, 2026.
On a pro forma basis, Tailwater Capital will own about 35% interest with a non-Tailwater controlled entity owning a 5% interest. At close, four directors appointed by Tailwater Capital will serve on the pro forma Summit board, along with SMC's existing board members and chief executive officer.
The deal is expected to close in this year’s fourth quarter, subject to customary closing conditions, shareholder approval, and regulatory approvals.