(Reuters) – Private-equity backed EagleClaw Midstream is suing the former owners of Caprock Midstream, alleging they failed to disclose tens of millions of dollars of liabilities during acquisition talks.
EagleClaw in 2018 acquired natural gas pipeline operator Caprock Midstream Holdings from Energy Spectrum Capital and Caprock Midstream Management for $950 million. After the deal closed, EagleClaw discovered “numerous issues and claims for liabilities” with the pipeline assets, according to a lawsuit filed in a Texas court in Houston.
The largest amount was a $22 million bill presented after the close by Cimarex Energy Co (N:XEC) from an audit of a gas gathering, water handling and electrical services agreements, the suit claimed. EagleClaw is owned by private equity firms Blackstone (NYSE:BX) Capital Partners and I Squared Capital.
EagleClaw would not have completed the deal without obligating Caprock to defend those claims had it been aware of the audit, according to the lawsuit. Representatives for EagleClaw did not immediately respond to a request for comment.
Caprock and Energy Spectrum Capital could not immediately be reached for comment.
Blackstone and I Squared did not immediately reply to requests for comment.
A Cimarex spokesman had no immediate comment.
EagleClaw’s suit seeks undisclosed damages for breach of contract and access to $4.75 million held in an escrow account.
The company said it also expects to incur $4 million in costs to fix “severe corrosion” in a gas pipeline it claimed had defective joints, and $600,000 to repair a natural gas processing plant in Texas that suffered shutdowns.
The case is Eagleclaw Midstream Ventures v Caprock Midstream, Harris County District Court, 2020-31025.