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DCP Midstream Expands Permian Basin Footprint with $160 Million Bolt-on Acquisition
07/19/2022
An oncoming bolt-on acquisition of Woodland Midstream gathering and processing assets in the Permian Basin by DCP Midstream LP is estimated at $160 million dollars.
The president and CEO of DCP Midstream stated in the release, that the company is eager to announce the contract to enlarge its Permian gathering and processing business with assets that have connectivity to its existing infrastructure and fit its long-term strategy of securing cumulative volumes for the downstream assets.
According to a definitive agreement announced on June 14, DCP Midstream will get the James Lake System from Woodland Midstream II, a portfolio company of EIV Capital. DCP anticipates funding the bolt-on acquisition using cash on hand and borrowings under the company’s existing bank facilities.
Since the James Lake System is situated within three miles of DCP’s Goldsmith processing facility in the Permian Basin, it provides the opportunity to maintain significant synergies and reduce the acquisition multiple over time. The System includes about 230 miles of gathering pipe and a 120 MMcf/d cryogenic processing facility, increasing DCP’s capacity and serving significant synergies with the company’s Goldsmith processing facility in Ector County, Texas.
It is deeply considered that achieving the record first quarter performance and recent investment grade rating is an exciting next step in strengthening the company’s operating model, generating additional value for its stakeholders, and driving improved reliability for the customers. DCP said the bolt-on acquisition of the James Lake System is an immediately accretive transaction representing an approximately 5.5 times EBITDA multiple.
Two years earlier, the James Lake System had been acquired by Woodland Midstream II from a privately-owned seller for an undisclosed amount in October 2019. Woodland’s partnership with EIV Capital in February 2019 was represented by the transaction of the first operating asset, which encompassed a substantial capital commitment from EIV Capital.
The James Lake System attends producers within the Permian’s Central Basin Platform in Ector, Andrews, and Winkler counties, Texas. It is expected that DCP also secures about 250,000 dedicated acres and the transaction itself is expected to be completed in the third quarter of the year. The James Lake System cash flows are underpinned by primarily fee-based, long-term agreements with a varied group of independent operators and investment-grade public companies.
To ensure the fulfillment of this transaction: Holland & Hart LLP provides legal counsel to DCP; Intrepid Partners, LLC is a financial adviser and McDermott Will & Emery LLP is a legal advisor to Woodland Midstream II.
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Momentum Midstream Becomes a Leader in Haynesville Due to Latest Acquisitions
Houston-based company Momentum Midstream LLC on September 22 purchased Midcoast Energy LLC’s East Texas business from an affiliate of Arc Light Capital Partners LLC and Align Midstream LLC from Tailwater Capital and claimed that it establishes a leading presence in the Haynesville Shale. New Generation Gas Gathering or NG3 project will collect natural gas produced in the Haynesville Shale for re-delivery to premium Gulf Coast markets, including LNG export. Moreover, the NG3 project includes a carbon capture and sequestration component that will eliminate 100% of the CO₂ and accumulate it underground for a long time, creating a net negative carbon footprint. With the combined assets of Midcoast ETX and Align Midstream, Momentum is currently delivering volumes of more than 2 Bcf/d for a diverse customer base composed of producers, utilities, end-users, and LNG exporters. Momentum’s footprint in the Haynesville includes about 3,000 miles of gathering pipelines, 1.5 Bcf/d of treating capacity, 700 MMcf/d of processing capacity, 200,000 HP of compression, and 820 miles of pipelines transporting gas to the Gulf Coast markets in southeast Texas and the Carthage and Bethel markets in East Texas.
Baker Hughes To Help Driftwood Pipeline Decarbonize Its Lines 200 and 300 Projects
According to a press announcement on June 29, Baker Hughes got a contract to supply electric-powered Integrated Compressor Line (ICL) decarbonization technology and turbomachinery equipment for an upcoming natural gas transmission project by a subsidiary of Tellurian Inc. – Driftwood Pipeline LLC. Driftwood Pipeline decided that the projects of Lines 200 and 300 would be situated in Beauregard and Calcasieu Parishes in southwest Louisiana and it will be the first time when Baker Hughes installs its ICL technology for pipeline compression in North America. Joey Mahmoud, president of Tellurian Pipelines, says the company expects that the project will give upwards of 5.5 Bcf of natural gas every day, with virtually no emissions. As a part of the agreement, Tellurian makes the initial $240 million pipeline investment as part of the broader Driftwood Pipeline system, which will keep enhanced supply reliability to meet the area’s projected industrial enlargement in a purer, more sustainable way. Baker Hughes has installed over 50 ICL units across the different pipeline and offshore applications, mainly in Europe. The compressors exert a reduced environmental footprint because their hermetically sealed casing prevents emissions from obviating. It is important to mention, that they require minimal downtime as magnetic bearings are resulting in more efficient operations and low maintenance.
Kinetik Holdings recently announced a series of transactions in the energy sector. They struck a deal to buy Durango Permian infrastructure for $765 million. At the same time, they're selling their 16% share in the Gulf Coast Express Pipeline to ArcLight Capital Partners for $540 million. The total purchase cost includes $510 million in cash paid immediately and an additional $30 million that will be paid later, depending on whether they decide to expand further.
Recently, the Permian has seen significant acquisitions: Exxon Mobil purchased Pioneer Natural Resources for about $60 billion. Diamondback Energy's $26 billion deal to acquire Endeavor Energy Resources is currently on hold due to requests from the U.S. Federal Trade Commission. Occidental’s acquisition of CrownRock for $12 billion in the Midland.
EOG Resources is pushing boundaries in Ohio's Utica oil play and now drilling on the Sable pad, also located in Noble County. This site features the 3.7-mile lateral currently under construction. The company's first multi-well pads in the area Timberwolf and Xavier have each produced over 200,000 barrels of oil since their inception—Timberwolf in August and Xavier in October. A third site, the four-well White Rhino pad in Noble County, is also showing promising early results, according to Keith Trasko, EOG’s Senior Vice President of Exploration and Production, who noted the wells are performing as expected in their initial weeks.