Tailwater Capital Announces Acquisition of Tall Oak Midstream II and III

January 27, 2021
Tailwater Capital LLC

Tailwater Energy Fund III to Acquire Tall Oak Midstream III, Retain Tall Oak Name

Tailwater Energy Fund IV to Separately Acquire Tall Oak Midstream II

Tall Oak Management to Lead Both Companies

DALLAS and OKLAHOMA CITY – January 27, 2021 – Tailwater Capital LLC (“Tailwater” or the “Firm”), a private equity firm based in Dallas, today announced that it has signed definitive agreements to acquire Tall Oak Midstream II (“Tall Oak II”) and Tall Oak Midstream III (“Tall Oak III”) from EnCap Flatrock Midstream. Financial terms were not disclosed. 

Tall Oak III Transaction
Through this transaction, Tailwater will acquire a leading midstream service provider in the Arkoma Basin. As part of the transaction, the Tall Oak team – led by Ryan Lewellyn, Carlos Evans, Max Myers and Lindel Larison – will operate Tailwater’s existing portfolio company, Connect Midstream, a full-suite midstream service provider in the same geographic region, creating the potential for immediate and uniquely significant operating synergies. Tall Oak III’s assets consist of more than 120 miles of low-pressure and high-pressure pipelines in the Arkoma Basin, as well as the recently developed and fully operational Panther Creek Plant, a 200 MMscf/d RSV technology processing plant that currently moves processed gas to MarkWest’s Arkoma Connector.

With operations across three counties in the Arkoma STACK basin’s rich gas window, Connect Midstream has delivered a wide range of unmatched, innovative solutions to customers since its formation in partnership with Tailwater in 2017. Since that time, the company has grown its footprint substantially, secured a number of dedications from leading players in the region and completed construction and commenced processing operations at its Stanberry Plant, a 200 MMscf/d processing facility in Coal County, Oklahoma.

Following the close of the transaction, which is subject to customary regulatory and closing conditions, Tall Oak will manage an enhanced footprint with materially improved processing and compression capacities and an expanded pipeline network that will greatly benefit the larger and more diverse customer base it will serve, all of which will better position the company to compete with larger midstream players in the region. 

Tall Oak II Transaction
In a separate transaction, Tailwater will also acquire a majority of assets of Tall Oak II, a full-suite midstream provider serving customers in the Mid-Continent. Founded in 2015, Tall Oak II was established to pursue greenfield and acquisition opportunities in oil and gas plays across North America and currently consists of over 750 miles of low and high-pressure gathering lines across eight Oklahoma counties in the STACK Extension. 

Tall Oak II assets in Custer County, Oklahoma were not included in the transaction with Tailwater.  EnCap Flatrock Midstream will retain ownership of these assets in a new entity, the Oklahoma STACK Gathering System (“OSGS”) which will be managed by the Tall Oak management team. OSGS assets consist of high-pressure wellhead gathering lines to gather from both rich and dry gas wells in the area and a dehydration facility.

“These transactions are the next logical step in both Tailwater and Connect Midstream’s long-term Arkoma STACK consolidation and growth strategy and will significantly expand our footprint and processing capacity in the liquids-rich Arkoma Basin,” said Jason Downie, Co-Founder and Managing Partner at Tailwater Capital. “Ryan, Carlos, Max and Lindel and the rest of the Tall Oak management team are best-in-class operators with an unparalleled network of resources and a long track record of significant value creation. We look forward to working together to grow the Tall Oak businesses organically and through acquisitions, and providing customers with the most effective and versatile set of capabilities in their regions of operation.”

“We are pleased to have reached these agreements with Connect Midstream and Tailwater Capital to position the Tall Oak companies for increased market leadership and sustainable, long-term success,” said Ryan Lewellyn, President and Chief Executive Officer of Tall Oak. “These transactions will provide our business with tremendously improved system capacity infrastructure and an increasingly diverse customer base, positioning us to compete with larger peers in the region and to capitalize on a number of exciting opportunities alongside our new partners at Tailwater.”

“It has been a privilege to partner with the Tailwater team over the past few years. One of our driving principles has been centered on nimble, strategic decision making and this transaction is no exception,” said Brandon Webster, President and Chief Executive Officer of Connect Midstream. “We are proud of the system we have built at Connect Midstream and believe the Tall Oak team is perfectly situated to drive its continued growth.” 

Tudor, Pickering, Holt & Co. served as exclusive financial advisor to Tailwater Capital and Connect Midstream and Thompson & Knight LLP served as legal counsel to Tailwater Capital and Connect Midstream in connection with negotiation and documentation of the transactions. Winston & Strawn LLP provided legal counsel to Tall Oak Midstream. Shearman & Sterling LLP represented EnCap Flatrock Midstream.

About Tailwater Capital, LLC
Dallas-based Tailwater Capital is a growth-oriented energy private equity firm with a well-established track record of working constructively with proven management teams to deliver value-added solutions. Tailwater currently manages more than $3.7 billion in committed capital and the team has executed more than 100 energy transactions in the upstream and midstream sectors representing over $20 billion in transaction value. For more information, please visit www.tailwatercapital.com.

About Tall Oak Midstream, LLC
Based in Oklahoma City, the Tall Oak companies are dedicated to bringing a fresh perspective to serving oil and gas producers with a full suite of midstream services. Core capabilities include natural gas gathering, compression, treating and processing; crude oil gathering and transportation; condensate and water handling; and product marketing solutions. Tall Oak was founded in 2014 by Ryan Lewellyn, Carlos Evans, Max Myers and Lindel Larison who brought diverse and complementary background across the midstream and upstream sectors. Please visit www.talloakmidstream.com for more information.

Media Contacts
For Tailwater Capital:

Jonathan Keehner / Julie Hamilton 
Joele Frank, Wilkinson Brimmer Katcher
212-355-4449

For Tall Oak Midstream:
Anthony Triana
atriana@saxum.com
405-818-0791