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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.
If you are further interested in looking deeper into gathering and processing assets in the Permian Basin, please, contact our Houston sales office or SCHEDULE A DEMO to learn how Rextag can help you leverage energy data for your business. Tel. +1 713-203-3128 Email: treitmeier@hartenergy.com
Earthstone Expands Due to Acquisition of Titus’ Delaware
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Earthstone Energy Inc., based in Texas, announced the transaction on June 28: the acquisition of Titus Oil&Gas which will raise production in the Delaware Basin by 26%. The $627 million acquisition fills the Permian Basin in Eddy and Lea counties, N.M. with 86 net locations on 7,900 net acres of leasehold, while it is not clear how much of the leasehold might be on federal acreage It is Earthstone’s seventh acquisition since 2021, a span that includes the closing of approximately $1.89 billion in acquisitions in the Permian Basin. The purchase of Titus Oil & Gas Production LLC and Titus Oil & Gas Production II LLC, privately held companies backed by NGP Energy Capital Management LLC, is estimated at $575 million in cash and it is the equivalent of $52 million in stock (3.9 million shares of its Class A common stock based on the June 24 closing price). Titus shared that its net production in June was 31,800 boe/d. The company had reserves of approximately 28.9 MMboe. Earthstone is sure its net production will increase, at the midpoint, by 20,500 boe/d (65% oil) in the fourth quarter.
Bison Gas Gathering System Sold: $40M Cash Paid By Summit Midstream to Steel Reef
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Steel Reef acquires Summit Midstream’s Bison Gas gathering system in North Dakota for $40 million in cash as part of Houston-based Summit’s plans to streamline its portfolio. According to a release on September 19, with the sale of Bison Midstream, Summit’s focus in the Williston Basin will be on increasing its crude oil and produced water gathering systems mainly situated in Williams and Divide Counties, North Dakota. The Bison agreement follows the sale of Summit’s Lane gathering and processing system in the #PermianBasin to Matador Resources Co. in June for $75 million. The merger of the divestitures creates additional financial flexibility to reinvest in more strategic scale-building opportunities across Summit’s footprint. Summit Midstream is interested in the status of customer development activity in central Williams County and pro forma for the transaction and anticipates over 50 new wells behind our liquids system in 2023. Pro forma for the Bison transaction, Summit will have about $90 million drawn on its $400 million ABL credit facility, resulting in over $300 million of available liquidity, according to Deneke. The company continues to anticipate to trend toward the high end of our 2022 Adjusted EBITDA guidance range of $205 million to $220 million.
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Enbridge acquired Tres Palacios natural gas storage facility in Texas for $335 million, adding approximately 35 Bcf of natural gas storage to their portfolio. The facility uses salt caverns for storage and has a gas header pipeline system that spans 62 miles and links to 11 major gas pipelines. Crestwood Equity Partners LP intends to divest its interests in Tres Palacios by the second quarter.
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The U.S. natural gas pipeline network is a complex system of pipelines that transport natural gas from production areas to consumers across the country. The pipeline network consists of three main types of pipelines: gathering pipelines, transmission pipelines, and distribution pipelines. Gathering pipelines are small-diameter pipelines that transport natural gas from production wells to processing facilities or larger transmission pipelines. Transmission pipelines are large-diameter pipelines that transport natural gas over long distances, sometimes across multiple states. Distribution pipelines operate at low pressure and are located in or near urban areas. They are often referred to as "utility pipelines" because they are typically owned and operated by local gas utility companies.
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Diamondback Energy, an independent oil and gas company, has successfully completed the acquisition of Lario Permian, marking the closure of two major deals in the fourth quarter of 2022. The company purchased two private operators in the Midland Basin for approximately $3.3 billion.