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Apache's Altus Midstream to Merge with EagleClaw in All-stock Deal

The Altus Midstream Company and EagleClaw Midstream agreed on Oct. 21 to combine operations.

Together, they will be the world's largest integrated midstream player in one of the most prolific hydrocarbon basins — the Permian Basin, enabling them to provide scale, core operational capabilities, and fully integrated services essential to long-term success.

In West Texas, Altus and EagleClaw have a combined capacity of approximately 2 Bcf/d of state-of-the-art natural gas processing. According to the company's release, Altus will become the largest natural gas processor in the Delaware Basin, as well as the third-largest for the entire Permian Basin, following this deal.

As a result of the new processing and transportation capabilities for all three streams, top management noted that the pro forma enterprise is well-positioned to leverage the accelerated activity in the Delaware Basin.

Jamie Welch, CEO of EagleClaw, will lead the combined company's new management team. The division will remain headquartered in Midland, with corporate leadership in Houston, and operate under a new name, which will be disclosed shortly.

In addition, Apache amended its commercial agreement with Altus to incentivize activity in the Delaware Basin, and the company will continue to be an important customer of the newly combined entity's natural gas gathering and processing projects.

Apache’s parent company, APA Corp., says this transaction builds Scale and Liquidity, which are important to Altus' evolution as a publicly-traded company.

With 79% of Altus in ownership, Apache Midstream has agreed to a customary 12-month lockup period of its respective holdings with Blackstone, and I Squared. In exchange, The company may sell up to 4 million shares up until three months after the closing if the proceeds from the sale are invested in Alpine High development activities in the Delaware Basin within 18 months. The sum of investment should amount to $75 million.

APA's decision to reduce its ownership in Altus is a logical continuation of its efforts to streamline its portfolio and unlock the value of its midstream infrastructure.

By combining with BCP Raptor Holdco LP, Altus will acquire EagleClaw Midstream Ventures, Caprock Midstream, and Pinnacle Midstream, as well as a 26.7% stake in the Permian Highway Pipeline.

Midstream Logistics, formerly Gathering and Processing, and Pipeline Transportation will operate in Pro forma Company. EBITDA in 2022 from these two segments is expected to be split roughly as 65% and 35% accordingly.

During the next three years, the company expects EBITDA synergies of at least $50 million, with total integration costs of less than $100 million.

Upon completion of customary closing conditions, such as shareholder approval from Altus and regulatory reviews, the transaction is expected to close during the first quarter of 2022.

As a financial advisor to Altus Midstream, Credit Suisse Securities (USA) LLC is representing it in the deal, while Bracewell LLP is representing its legal counsel. Goldman Sachs is representing Apache in this regard. Financial advisers to BCP, Blackstone, and I Squared include Citi, Greenhill, Intrepid, and Jefferies, while legal advisors include Vinson & Elkins LLP and Sidley Austin.

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A $2 billion deal saw Dominion Energy sell Questar Pipelines to Southwest Gas

A good asset will not sit on the market for long. After a deal with Berkshire Hathaway fell through, Dominion Energy managed to secure another one for Questar Pipelines in a drop of a hat. And get that, it is better than the former one by more than half a billion! Although not everyone is happy with such decisions, it seems that even Carl Icahn’s complaints won't be able to sway Southwest Gas Holdings’ decision. Though we will have our eyes peeled in any case… If everything goes as planned, a $2 billion deal will be closed before the end of the year.

Enbridge Inc. finally delivered on several of its long-overdue promises, including the $4 billion Line3 Replacement project. Which consisted of replacing an existing 34-inch pipe with a new 36-inch one for 13 miles in North Dakota, 337 miles in Minnesota, and 14 miles in Wisconsin. Midstream companies, in general, had a stunning Q3. It was the first quarter in two years that no midstream index members cut their dividends.

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The EIA forecasts that total output in the main U.S. shale oil basins will increase 142,000 bbl/d to 8.761 million bbl/d in June, the most since March 2020. Oil productivity in the Permian Basin in Texas and New Mexico is supposed to go up 88,000 bbl/d to a record 5.219 million bbl/d in June, as the U.S. Energy Information Administration (EIA) announced in its report on May 16. In the largest shale gas basin, the productivity in Appalachia in Pennsylvania, Ohio and West Virginia will grow up to 35.7 Bcf/d in June, its highest since beating a record 36 Bcf/d in December 2021. Gas output in the Permian Basin and the Haynesville in Texas, Louisiana and Arkansas will rise to record highs of 20 Bcf/d and 15.1 Bcf/d in June, respectively. Speaking of the Permian future output, putting hands on upcoming changes in production has recently been made easier with the new Rextag's service - Pad Activity Monitor. Thanks to satellite imagery and artificial intelligence, customers are able to monitor the oil and gas wells and are provided with near real-time activity reports related to drilling operations. However, it is noticed that productivity in the largest oil and gas basins has decreased every month since setting records of new oil well production per rig of 1,544 bbl/d in December 2020 in the Permian Basin, and new gas well production per rig of 33.3 MMcf/d in March 2021 in Appalachia.

No sooner had the crude prices soared above $100/bbl than the industry professionals believed in an incredible growth of drilling activity in North America’s largest shale patch. Analysts speculate that additional output of 500,000 barrels of oil daily would become a significant part (4%) of overall U.S. daily production. That is going to flatter oil and gasoline prices. Drilling permits in the Permian Basin are persistently growing, averaging approximately 210 at the beginning of April. Moreover, the permits trend is noticed as an all-time high as a total of 904 horizontal drilling permits were awarded last month. Nowadays, learning and analysing the current situation and predicting the future development become easier with early activity tracking, a new service recently launched by Rextag. Rextag's Pad Activity monitor (PAM) allows you to see well pad clearing, drilling operations, fracking crew deployment and completions with new data collected approximately every 2 days with the help of satellite imagery and artificial intelligence. While the increase in drilling will result in higher production, U.S. shale producers will have to overcome several hurdles including labor shortages and supply constraints.

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