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Summit Midstream to Acquire Assets in DJ Basin for $305 Million

Recent acquisitions totaling $305 million in cash bring Summit Midstream the opportunity to build up its Denver-Julesburg basin assets.

Its subsidiary, Summit Midstream Holdings, concluded a deal to purchase Outrigger DJ Midstream from Outrigger Energy II and Sterling Energy Investments, Grasslands Energy Marketing, and Centennial Water Pipelines from Sterling Investment Holdings.

Weld County-based Outrigger’s assets in Colorado are significant as they include a 60 MMcfd cryogenic natural gas processing plant, almost 70 miles of low-pressure natural gas gathering lines, 90 miles of high-pressure natural gas gathering lines, 12,800 horsepower of field and plant compression, and roughly 30 miles of crude oil gathering pipelines.

The gathering agreements for Outrigger DJ system are comprised of long-term, fee-based contracts with a weighted average term of over 10 years. Volume throughput on the Outrigger DJ system is underpinned by acreage dedications, with a valued 310,000 leased acres from its key customers, including Mallard Exploration and other producers in the region. Outrigger DJ conveys residue gas to Cheyenne Plains, natural gas liquids to the Phillips 66 NGL System, and crude oil to Pony Express Pipeline.

Moreover, the Sterling DJ assets, in Weld, Morgan, and Logan Counties, Colorado, and Cheyenne County, Nebraska, have three cryogenic processing plants with a nameplate capacity of 100 MMcfd, some 450 miles of natural gas gathering lines, 8,500 horsepower of field compression, freshwater rights, and 40 miles of subsurface freshwater delivery infrastructure.

Sterling DJ's commercial contract portfolio includes long-term, fee-based, and percentage-of-proceed agreements with a weighted average term of over 11 years. Volume throughput on the Sterling DJ system is underpinned by acreage dedications, with a valued 170,000 leased mineral acres attributable to several DJ basin producers. Sterling DJ supplies Cheyenne Plains, Southern Star, and Trailblazer with residue gas and Overland Pass with natural gas liquids.

Dedicated acreage spans productive, oil-prone areas within the basin, with producers primarily targeting the Niobrara and Codell formations.

Combining operations of the three systems will build commercial and operating synergies and supply substantial running room to increase dedicated producer volumes in the coming years with minimal capital expenditure requirements. In 2023 Outrigger DJ and Sterling DJ customers are anticipated to link over 75 new wells and are well positioned to sustain and potentially raise that level of development activity in the coming years with more than 675 active permits currently held on devoted acreage.

Additionally, within the prevalence of gas processing constraints across the DJ Basin, the relatedness of the combined asset footprint with other gathering systems, and the integration of the underutilized Summit Hereford and Sterling DJ Jackson Lake processing complexes, the company considers there will be extra near-term upside opportunities to increase volumes both organically and through offload arrangements with other midstream operators in the basin.

Summit Midstream concluded that the transactions were anticipated to close during the fourth quarter of 2022, subject to customary regulatory approvals.

Whether you are searching for information about midstream companies, their assets, and related deals, please, contact our Houston sales office or SCHEDULE A DEMO to learn how Rextag can help you leverage energy data for your business.

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Outrigger Sells Its DJ Basin Assets to Summit for $305 Million to Focus on the Williston Basin

Recent acquisitions totaling $305 million in cash bring Summit Midstream the opportunity to build up its Denver-Julesburg basin assets. Its subsidiary, Summit Midstream Holdings, concluded a deal to purchase Outrigger DJ Midstream from Outrigger Energy II and Sterling Energy Investments, Grasslands Energy Marketing, and Centennial Water Pipelines from Sterling Investment Holdings. Weld County-based Outrigger’s assets in Colorado are significant as they include a 60 MMcfd cryogenic natural gas processing plant, almost 70 miles of low-pressure natural gas gathering lines, 90 miles of high-pressure natural gas gathering lines, 12,800 horsepower of field and plant compression, and roughly 30 miles of crude oil gathering pipelines.

California oil joint venture, Aera Energy, of Exxon Mobil Corp. and ShellPlc is being sold to German asset manager IKAV, according to the agreement of Sept. 1. Shell noted that the sale of its 51.8% membership interest in Aera Energy is for a total consideration of about $2 billion in cash with additional contingent payments based on future oil prices, subject to regulatory approval. However, the total transaction value was not disclosed. Being one of California’s largest oil and gas producers, Aera Energy accounts for nearly 25% of the state’s production. The sale by Exxon Mobil and Shell ends a 25-year-long partnership in California, meanwhile, it persists a streak of divestments of mature oil and gas properties by the two supermajors. Aera Energy LLC operates about 13,000 wells in the San Joaquin Valley in California, producing oil and associated gas. In 2021, Aera took out about 95,000 boe/d. Exxon Mobil’s interests in the Aera oil-production operation in California contained a 48.2% share of Aera Energy LLC and a 50% share of Aera Energy Services Co. held by Mobil California Exploration & Producing Co. Moreover, Exxon Mobil affiliates have signed a separate agreement for the sale of an associated loading facility and pipeline system. The sale effectively ends Shell’s upstream position in California. The company reported that the divestiture is valued to result in a post-tax impairment of $300 million to $400 million, subject to adjustments.

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.

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.

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.

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