‘Christmastime’ Environment for Aethon Energy

A recent co-investment done with Redbird Capital to acquire assets of SM Energy is just one of many opportunities that Aethon’s Albert Huddleston sees in a volatile market.

The current environment in the oil and gas market—one of volatility with a measure of uncertainty—has the industry veterans at Aethon Energy very excited because of some appealing investment opportunities.

One of these opportunities was the recent acquisition of the Arkansas-Louisiana-Texas assets from SM Energy with a co-investment from Redbird Capital. Aethon’s founder and partner Albert Huddleston says the assets are a “nice bolt-on to an existing Haynesville position and current properties,” referring to the informal name for a shale rock formation spanning parts of the three adjoining states. “I see tremendous opportunity to acquire properties like SM with cash flow and upside. We are bullish on the long-term future of natural gas.”

The Dallas-based firm was founded in 1990 with an operating bent, acting as both private equity provider—investing its capital and that of others—and an operator of assets. Historically, they’ve had family office partners in co-investments and have completed two previous transactions with Redbird, says Huddleston.

Aethon already had a position in the Haynesville Formation, so the acquisition of assets fit its strategy “to a T,” he says. “We liked it before the prices collapsed late last year, and we like it even more today. I do feel like it’s a Christmastime environment for us.… We have a significant pipeline of opportunities we’re exploring.” There could be other acquisitions that come up in the Haynesville Formation, taking advantage of the presence Aethon already has. “We know that once you buy in a neighborhood, there are opportunities to buy bolt-ons and buy other neighbors out,” says Huddleston.

The assets from SM that were acquired along with the co-investment by Redbird include “existing cash-flowing unconventional properties that have been de-risked, with exceptional upside,” he explains, adding that over time, given Aethon’s strategy—and regardless of any price increases in oil and gas—there should be profitability and the possibility for additional bolt-ons.

“We do all our underwriting and execution in-house, and year in, year out, we do the same things over and over again,” Huddleston says. “It gives people looking to sell assets great confidence that we are credible and trustworthy buyers.”