Exclusive: Frank Tsuru Reflects on Indigo's History, Impact in the Haynesville

Frank Tsuru, president and CEO of Momentum Midstream and former CEO of Indigo Natural Resources, looks back at the early stages of Haynesville development and the Indigo-Southwestern deal, in this Hart Energy Exclusive interview. 

Darren Barbee  Oil and Gas Investor  Thu, 04/11/2024

Darren Barbee: Hi, my name is Darren Barbee and I'm senior managing editor at Hart Energy. I'm here with Frank Tsuru, the president and CEO of Momentum Midstream. He's also the former president and CEO of Indigo Natural Resources. The first thing I wanted to start off with was talking a little bit about Indigo's history and the deal that you did with Southwestern a couple years ago.

Frank Tsuru, president and CEO, Momentum Midstream: Indigo was initially a Cotton Valley [, Louisiana] company. We drilled and exploited the Cotton Valley and actually sold our deep rights to Chesapeake during the first stage of the Haynesville [development]. We watched the Haynesville develop, we watched what was going on and we actually made an acquisition in 2015, 2016 time period of the Chesapeake non-core acreage. That was around the western and the southern side of the basin, and that's where we got our start in the Haynesville.

DB: You mentioned that after the deal that the $2.7 billion deal you guys did, I believe in 2021, that Momentum actually took an uplift as a result of that deal. Can you talk a little bit about that?

FT: What happened was that Indigo was a 50% owner in the midstream assets that Momentum built, and we built and fed the whole midstream asset with Indigo gas, and it's a real benefit for midstream companies that can actually direct the drill bit and drill wells in or around the midstream assets. What we did was we were able to sell midstream assets, and as you know, midstream asset multiples are somewhere between eight and 10 times, whereas upstream multiples are three-and-a-half to five times. So we got a big uplift by selling the midstream assets at a 10 x multiple.

DB: So whether it's Chesapeake or Southwestern, how is it dealing with a larger public acquiring entity and do you feel like you are on equal footing? Can you kind of explain that process?

FT: Sure. When we sold Indigo, we knew we'd be working with a larger company and we had no trepidation whatsoever about being ready to sell to them. The company [Indigo] was built on solid technical and engineering standards, and we knew exactly how to drill the wells, complete the wells and produce the wells. And actually a larger company coming in like Southwestern that did not have experience in the Haynesville, they took a lot of our policies, procedures and techniques of drilling these Haynesville wells and completing them and went forward that way.

DB: The other thing I wanted to ask was, I know we had kind of talked about this earlier, was the idea that you guys were ready to go as far as an IPO had done all the due diligence. So one way or another you're going to exit. What made an exit to a public acquirer more enticing than an IPO?

FT: The management team looked at each other and said, ‘Who's going to be the face of the company? Who's going to be going to all these conferences?’ And nobody raised their hand. So in all truthfulness, we really didn't want to go public. There's a lot of work and effort that can be avoided by just selling to a larger company.

DB: One other thing that you said to me was, there's not going to be another Indigo, but I am kind of curious, if you look at the landscape of the Haynesville right now, do you see space for another Indigo? Is there areas that you think could be as productive and as lucrative as Indigo was?

FT: Well, I say there's not another Indigo. There's two companies that actually respond off of Indigo, where many of the Indigo employees went to. Paloma is one where several Indigo employees are, and Azul is another one. So those two companies were formed from the management team and many technical individuals. And so I guess I take credit for making Indigo to these two companies.

DB: All right, good enough. Thank you very much for being here at DUG GAS+ Conference and Expo, and for more energy intelligence, please visit hartenergy.com.

FT: Thank you.