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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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The Deal between TC Energy and Mexican Utility is Concluded to Build $4.5 Billion Gas Pipeline
TC Energy Corp. had reached a deal with a Mexican state utility to build a $4.5 billion natural gas pipeline, according to a company release on Aug. 4. The natural gas to Mexico's central and southeast regions will be furnished by the 1.3 bcfd offshore Southeast Gateway Pipeline, the Canadian pipeline operator said. Due to the most serious trade spat with #Mexico over the United States-Mexico-Canada Agreement, Canada and the United States made the deal with Comisión Federalde Electricidad (CFE). TC Energy and CFE in conjunction with the alliance also took the final investment decision (FID) on the 715-km Southeast Gateway. The pipeline will serve southeast Mexico, starting onshore in Tuxpan, Veracruz, then proceeding offshore, making landfall at Coatzacoalcos, Veracruz, and Dos Bocas, Tabasco.
$205 Million for Marcellus Assets Divested by Crestwood to Antero
Antero Midstream Corp. bought Marcellus assets of Crestwood Equity Partners LP on September 12 for $205 million in cash, signing another sale of noncore assets by the Houston-based company. Crestwood has strategically enhanced its asset portfolio through a series of A&D transactions for the previous 18 months to create a competitive scale in the Williston, Delaware, and Power River basins. The strategy covered acquisitions of Oasis Midstream Partners, Sendero Midstream, and Crestwood Permian Basin Holdings LLC (CPJV), which was a 50:50 joint venture of Crestwood and First Reserve. The assets to be bought cover 72 miles of dry gas gathering pipelines and nine compressor stations with about 700 MMcf/d of compression capacity. The current throughput on the system is approximately 200 MMcf/d, resulting in important available capacity for increase without major capital investment. The deal includes almost 425 undeveloped drilling locations and 120,000 gross dedicated acres from Antero Resources mainly in Harrison County. The acquisition is also anticipated to raise Antero Midstream’s compression capacity by 20% and gathering pipeline mileage by 15%.
The U.S. has overtaken Saudi Arabia and Russia to become the world's largest oil and gas producer. In 2024, America's oil output has surpassed last year's record by 1.4%, reaching new heights. Even as oil-producing countries in the Middle East cut back, the U.S. continued to ramp up production after a downturn in 2020, establishing itself as a dominant force in the global market. In terms of numbers, U.S. oil production jumped from an average of 2.93 million barrels per day in 2023 to 13.12 million barrels per day in 2024, marking a significant 7.1% increase.
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.