Tailwater Capital

Tailwater Capital’s Herring Sees Promise in ‘Gasification’ of the Economy

Edward Herring, a co-founder and managing partner at Tailwater Capital, said the Russia-Ukraine war reinforces the private-equity firm’s conviction on the importance of natural gas in the transition to clean-energy sources

Private-equity firm Tailwater Capital is a big believer that natural gas will be critical for facilitating the economy’s shift to clean-energy sources.

The Dallas-based investor, which traditionally has backed pipeline operators, more recently has expanded into providers of other natural gas-related services. The firm last year acquired NorTex Midstream Partners LLC, a Houston-based operator of underground systems where utilities and power generators can store natural gas and retrieve it when needed.

Like many other private-equity firms focused on energy, Tailwater is also investing in businesses that cater to the clean-energy industry, such as lithium-ion battery recyclers. But the “gasification of the economy,” as the firm calls the expanding role of natural gas as an energy source, remains among its core focuses, said Edward Herring, a Tailwater co-founder and managing partner.

Mr. Herring spoke to WSJ Pro Private Equity about how the Ukraine-Russia war can help change investors’ view of natural gas, while reinforcing Tailwater’s own investment strategy, as well as the conflict’s possible implications for the U.S. natural-gas industry. Responses have been edited for space and clarity.

WSJ Pro: How do you see the Ukraine-Russia war and the resulting rise in commodity prices affecting U.S. energy markets?

Mr. Herring: I think the implications are very strong for the U.S. natural-gas industry. Over the past seven, eight years, the Gulf Coast has constructed [liquefied natural gas] infrastructure and now has the ability to take significant amounts of dry gas coming from the active basins in the U.S., liquefy [that gas] and ship it to Europe. We’ve got [roughly] 11 billion cubic feet a day of existing LNG export capacity in the Gulf Coast, [while] Europe imports about 18 bcf [of natural gas] a day from Russia. The spotlight is upon us now.

WSJ Pro: What about the implications for energy investors?

Mr. Herring: We believe at Tailwater that the path to a low-carbon economy needs to have natural gas as a major component. We call it the gasification of the economy. I absolutely believe that it is going to be something that investors will get more and more comfortable with over time. Whether the war in Ukraine and the implications on Europe are the catalyst, I don’t know. But I do think it’s shining a spotlight on energy security in [other] countries and we should take notice of that in America as well.

WSJ Pro: How is Tailwater addressing these opportunities in its own investment strategy?

Mr. Herring: We’re putting our money where our mouth is—on the conviction of [natural] gas needing to be an integral part of the [energy] transition landscape. We [continue to] invest in midstream infrastructure, in companies that take dry gas molecules and get them into locations where they can be turned into electricity or where liquefaction and exportation can happen. We [also] think that gas storage is going to be a more and more important part of our country’s energy reliability. What we’ve done to take advantage of that was to acquire [one of] the largest independent gas storage companies in North Texas, for example. It’s a growth area.

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