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Summit Midstream to Acquire Assets in DJ Basin for $305 Million
11/10/2022
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.
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Outrigger Sells Its DJ Basin Assets to Summit for $305 Million to Focus on the Williston Basin
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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.
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