Citadel hedge fund to buy $1 billion in Haynesville natural gas assets

(Bloomberg) – Citadel made one of its biggest investments yet in the physical U.S. natural gas market, expanding in one of its most profitable business areas.

The hedge fund, led by Ken Griffin, agreed to buy assets from closely held Paloma Natural Gas LLC in a deal valued at about $1 billion, people familiar with the matter said. The acquisition gives Citadel access to acreage and producing assets, though it will not operate them directly. 

While Citadel is already one of the most active traders of physical gas in the country, a foray into the drilling and production side of the industry is relatively unusual for a hedge fund.

Natural gas boom

Griffin is joining a wave of interest from energy traders and investors in natural gas. Demand for the fuel is soaring, driven by rising U.S. exports along with a jump in power consumption from data centers and artificial intelligence. Gunvor Group is looking to buy more U.S. gas production assets, while Mercuria Energy Group Ltd. has invested in Black Bayou Energy Hub LLC, a gas storage facility in Louisiana.  

“Investing in the growth of independent gas producers helps to ensure America’s energy independence, and Citadel performs an important role in that effort,” a spokesperson for Citadel said in a statement. The company didn’t provide details of the Paloma purchase.

Paloma Natural Gas listed 57,000 net mineral acres in Louisiana’s Haynesville shale basin on its website. The company did not respond to calls or emails for comment. EnCap Investments, which backs Paloma, did not respond to a request for comment. 

The Haynesville basin is viewed as a hotspot for gas assets given its proximity to export terminals expected to start up in the next few years. Newly formed Expand Energy has gained more scale in Haynesville assets, as well as in Appalachia.

The US is set to expand its LNG export capacity by 60% in the next few years, according to BloombergNEF.