Chevron shifts focus with $525m East Texas gas divestment to TG Natural Resources

Chevron Corporation has sold a 70% stake in its East Texas gas assets to TG Natural Resources for $525 million, marking another step in the oil major’s ongoing strategy to streamline its global portfolio. The deal, which involves both a $75 million upfront cash payment and a $450 million capital carry to fund Haynesville development, reflects Chevron’s continued efforts to focus capital on high-margin, core assets while retaining upside exposure through non-operated interests.

Chevron U.S.A. Inc., a subsidiary of Chevron Corporation, will maintain a 30% non-operated working interest and an overriding royalty interest in the East Texas gas assets, ensuring it remains financially tied to the future success of the acreage. TG Natural Resources, jointly owned by Tokyo Gas Co., Ltd. and Castleton Commodities International, assumes operatorship of the assets in a region that has long played a significant role in U.S. natural gas production.

The divestiture forms part of Chevron’s previously stated plan to sell $10 billion to $15 billion in assets by 2028. Chevron executives have emphasized the importance of capital discipline, especially as the company adapts to a world of increasingly volatile energy prices and investor pressure to deliver returns. The East Texas gas divestment offers a strategic mechanism to accelerate development of non-core acreage without stretching internal capital resources.

What does the capital carry structure mean for Chevron and TG Natural Resources?

The $450 million capital carry arrangement included in the deal means that TG Natural Resources will fund the majority of the development costs associated with the Haynesville assets. This structure provides Chevron with exposure to production growth and commodity-linked returns without having to contribute capital upfront. In this way, the capital carry acts as a development subsidy for Chevron’s retained interest, effectively reducing risk while preserving revenue opportunities.

This deal is a strong example of the increasing use of innovative financial structures in U.S. shale development, particularly for mature operators seeking to monetise legacy assets while still participating in future upside. It also reflects how newer or more regionally focused players like TG Natural Resources can leverage these arrangements to expand their footprint in high-potential basins like Haynesville, which has seen renewed interest due to rising natural gas prices and export demand.

TG Natural Resources expects the acquisition to add over 250 gross drilling locations to its Haynesville inventory, extending its development horizon by over 20 years based on its current pace. The acquired East Texas gas acreage is largely undrilled and held by production from shallower zones, which helps to mitigate the geological and operational challenges associated with newer well placements—particularly the so-called parent-child well interference, which can compromise productivity in tightly spaced developments.

How does this deal strengthen TG Natural Resources’ position in the Ark-La-Tex region?

TG Natural Resources is already one of the largest gas producers in the Ark-La-Tex region, which encompasses parts of East Texas, Northern Louisiana, and Southern Arkansas. With this acquisition, the company gains access to highly contiguous acreage that complements its existing portfolio. This operational overlap is expected to unlock an estimated $170 million in development synergies, according to the company’s internal projections.

Tokyo Gas Co., Ltd., which owns a 93% stake in TG Natural Resources, has been steadily expanding its presence in the U.S. natural gas sector as part of its long-term strategy to diversify away from its domestic market and secure reliable LNG supply for export. The Japanese utility has targeted upstream assets in North America to build a vertically integrated gas value chain. Castleton Commodities International, a global commodities merchant, owns the remaining 7% of TG Natural Resources and brings trading expertise that could further enhance the value of these assets.

The Ark-La-Tex region continues to be a strategic zone for natural gas development due to its robust infrastructure, proximity to Gulf Coast LNG terminals, and large reserves of economically recoverable gas. The Haynesville play, in particular, has gained renewed industry attention in recent years. Known for its high-pressure reservoirs and strong flow rates, the formation is especially attractive as U.S. LNG export capacity expands to meet growing international demand.

What does this sale signal about Chevron’s long-term strategic priorities?

Chevron’s exit from operatorship in East Texas is consistent with its broader goal of prioritising capital allocation toward high-return assets such as those in the Permian Basin, offshore Gulf of Mexico, and select international plays. While the East Texas gas asset sale reduces Chevron’s direct control over development activities in this area, it preserves long-term cash flow potential through its retained 30% working interest and royalty stream.

Historically, East Texas has been a core part of Chevron’s onshore U.S. operations, with decades of production history. However, as the energy landscape evolves and upstream operators seek to balance output with capital efficiency, companies like Chevron are increasingly focused on shedding lower-priority assets to fund returns-focused strategies. The use of a capital carry structure in this case offers a model for how legacy assets can still be monetised without a full exit, maintaining alignment between partners while shifting development risk.

Chevron has previously outlined its intent to generate more than $15 billion in free cash flow over the next five years through disciplined capital spending, enhanced operational efficiency, and portfolio high-grading. The Haynesville development funding enabled through this transaction directly supports these financial objectives while also helping Chevron meet long-term energy demand projections in a capital-light manner.

How has the market reacted to Chevron’s East Texas divestment?

Chevron Corporation’s (NYSE: CVX) stock responded positively to the announcement, closing at $168.51 on April 1, 2025, up 0.73% from the previous day. Analysts have largely endorsed the transaction as a logical next step in Chevron’s capital optimisation strategy. According to TipRanks, 14 Wall Street analysts currently maintain a “Strong Buy” rating on the stock, with an average 12-month price target of $176.64. MarketBeat similarly reports a consensus “Moderate Buy” rating, based on 16 analyst reviews and a price target of $174.13.

These ratings suggest cautious optimism about Chevron’s forward prospects, particularly as the company executes on its multi-year portfolio rationalisation. Analysts note that the capital-efficient nature of the East Texas gas transaction allows Chevron to redeploy capital while remaining leveraged to natural gas price recovery.

For investors, the outlook remains constructive. The stock is viewed as a stable large-cap energy play, particularly attractive for income-focused portfolios due to its dividend strength and balanced capital strategy. The East Texas divestment is seen as enhancing Chevron’s agility without sacrificing long-term earnings potential. Existing shareholders are widely advised to hold, while new entrants may consider initiating positions ahead of anticipated cash flow improvement.

What does this mean for future development in the Haynesville basin?

With over 250 new gross locations added to TG Natural Resources’ drilling inventory, this transaction is likely to drive increased development activity across the Haynesville play in the coming years. The capital carry model ensures that near-term investment flows into the acreage, potentially increasing local employment, boosting service activity, and strengthening gas supply for downstream applications such as LNG exports and petrochemical manufacturing.

Chevron’s continuing interest ensures alignment with TG Natural Resources’ operational goals and provides both companies with a platform to share best practices in drilling efficiency and production optimisation. The Haynesville development funding structure offers a roadmap for similar collaborations across U.S. shale basins, where mature producers seek to retain upside while transferring operational duties to more focused regional players.

The transaction also underscores the growing international investment in U.S. natural gas assets, particularly from Japanese utilities like Tokyo Gas that are seeking to secure long-term energy supply chains. This trend is expected to intensify as energy security and gas market volatility continue to shape investment decisions globally.