Tailwater Capital and its affiliate Tailwater E&P have closed Tailwater Royalties Fund II with approximately $170 million in total commitments. The fund is about 60% larger than Tailwater’s inaugural royalties vehicle.
The new fund continues Tailwater’s yield-focused strategy of acquiring mineral and royalty interests across leading U.S. shale basins. It is intended to expand the firm’s upstream energy portfolio while providing investors with current income and potential long-term appreciation.
Tailwater has already deployed or committed approximately half of the fund’s capital across 30 transactions in the Permian Basin. These investments have created a diversified portfolio of mineral and royalty interests operated by established energy producers.
Mineral interests provide ownership rights to the oil, natural gas and other resources beneath a property. Royalty owners typically receive a percentage of production revenue without bearing the full drilling and operating costs associated with a working interest.
This structure can give investors exposure to energy production while reducing direct responsibility for operating wells. Returns still depend on production volumes, commodity prices, drilling activity and the performance of the underlying operators.
Tailwater plans to focus on Tier 1 shale basins, which generally contain productive acreage with attractive development economics and substantial existing infrastructure. The firm believes the current minerals market provides opportunities to acquire high-quality assets while maintaining disciplined underwriting standards.
Investors in Fund II include family offices, asset management firms, registered investment advisers, energy-focused investment firms and foundations. The mix includes both returning investors and new limited partners.
Tailwater said the larger fund reflects investor confidence in its royalties platform and the experience of the Tailwater E&P team. The firm also attributed the growth to its sourcing capabilities and the range of acquisition opportunities available across the minerals market.
The fund uses Tailwater’s Full Immersion investment model, which draws on information and experience from across the firm’s energy and infrastructure platforms. This approach is designed to strengthen deal sourcing, asset evaluation and transaction execution.
Tailwater E&P specializes in acquiring and managing mineral interests, royalties and both operated and non-operated working interests. The platform targets established North American resource plays where the team believes it can build diversified and income-producing portfolios.
The fund’s existing Permian Basin investments provide exposure to one of the most active oil and natural gas producing regions in the United States. Tailwater intends to continue evaluating additional mineral and royalty transactions across other high-quality shale basins.
Dallas-based Tailwater Capital has raised more than $6 billion in committed equity capital since its founding. The firm and its teams have completed more than 300 transactions representing over $29 billion in total value.
KEY QUOTES:
“We are pleased to receive support from a diverse set of existing and new investors, including family offices, asset management firms, RIAs, energy-specific investment firms, and foundations, as we close Tailwater Royalties Fund II. The growth of Fund II relative to our inaugural fund reflects the strength of our royalties platform, the high quality of the TW E&P team, our disciplined sourcing strategy, and the compelling opportunity set we continue to see across the minerals market. We believe the current environment presents an excellent opportunity to continue building a differentiated portfolio of Tier 1 mineral interests.”
Doug Prieto, Partner at Tailwater Capital
“Royalties remain an attractive strategy for investors seeking current income and long-term upside through ownership of high-quality mineral assets. Fund II builds on the success of our first royalties vehicle and reflects Tailwater’s commitment to creating differentiated opportunities across the energy value chain.”
Edward Herring, Co-Founder and Managing Partner of Tailwater Capital
