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February Top U.S. Midstream Deals: Delaware Appears As the Key Area03/04/2019
As production in key locations continue to steadily grow, most midstream companies continued expanding their infrastructure to connect their major producing areas to the promising market delivery locations. Delaware saw most of this activity, where gathering infrastructure is still thought to be underdeveloped. Experts point out the proximity of Mexican and U.S. Gulf of Mexico market as well as growth of the U.S. exports capacity to be primary drivers of CAREX going into new projects.
For instance, see how Howard Energy Partners and NextEra Energy Partners connect their systems to reach both domestic downstream as well as exports market.
Similar capital inflow was seen in Agua Blanca NG Pipeline Deal as First Infrastructure Capital Advisors increased its stake in the pipeline.
Another activity - not quite in Delaware but close enough - was seen at New Mexico - Texas border area, where Matador Resources continued expand its gathering, storage and processing facilities as it enetered the San-Mateo II JV, second one with Five Point Energy.
All the midstream sector February 2019 deals that drew our attention can be found in the table below.
|Date announced||Buyer(s)||Seller(s)||Assets||Location||Deal Value||Date closed|
|Feb 4, 2019||First Infrastructure Capital Advisors LLC||WPX Energy Inc.||20% equity interest in WhiteWater Midstream’s 36-inch Agua Blanca natural gas pipeline (see the map)||Delaware Basin||$300 MM||Expected to close 1Q 2019|
|Feb 4, 2019||First Infrastructure Capital Advisors LLC||WhiteWater Midstream LLC, Denham Capital Management LP, Ridgemont Equity Partners||WhiteWater Midstream wholly acquired including its 60% stake in Agua Blanca (see the map)||Expected to close 1Q 2019|
|Feb 13, 2019||NextEra Energy Partners LP||>Howard Energy Partners||Formed JV to develop additional natural gas transportation opportunities in the Eagle Ford shale region of South Texas||South Texas: Webb, Duval, Zapata, Dimmit, La Salle, McMullen, Live Oak and Jim Wells counties||Undisclosed||Feb 13, 2019|
|Oct 3, 2018||Salt Creek Midstream LLC, Ares Management LP ARM, Energy Holdings LLC||Noble Midstream Partners LP||Formed 50/50 JV partnership to develop a crude oil pipeline and gathering system||Delaware Basin||Feb 8, 2019|
|Feb 19, 2019||The Blackstone Group LP, GSO Capital Partners LP||Targa Resources Corp.||45% stake in Targa Badlands, which operates oil and gas gathering and processing assets (see the map)||Bakken and Three Forks shale plays, Williston Basin of ND.||$1,600 MM||Expected to close 2Q 2019|
|Feb 25, 2019||Five Point Energy LLC, San Mateo Midstream LLC||Matador Resources Co.||Formed a new midstream JV, San Mateo II, to expand current gathering, processing and saltwater disposal capacity. 51% owned by Matador plus operational control||Northern Delaware Basin||Undisclosed||Feb 25, 2019|
|Feb 26, 2019||Hess Infrastructure Partners LP||Summit Midstream Partners LP||Water gathering assets of the Tioga Gathering System in Williams County, Western ND.||Williston Basin; Bakken||$67 MM||Expected to close 1Q 2019|
Crestwood & Oasis Midstream merge to create a top Williston #basin player. $1.8 billion deal is expected to close during the Q1 of 2022. The transaction will result in a 21.7% ownership stake for Oasis in Crestwood common units. The remaining ownership of Oasis in Crestwood will also be of benefit to the company since it will create a diversified midstream operator with a strong balance sheet and a bullish outlook after this accretive merger.
Pioneer Natural resources is looking to divest properties in the lone star state. According to Rextag, Pioneer’s Delaware assets on sale have a trailing 12 month production of just over 22 MBOE against a total Permian Basin production of almost 212 MBOE. (The sale, if it happens, will effectively lead to a 10% decrease of Pioneer’s asset base in terms of the previous year's production.)
On June 16 Targa Resources Corp. decided to acquire Lucid Energy Group, located in the Permian Basin, which is a part of Riverstone Holdings LLC and Goldman Sachs Asset Management. Firstly, Targa enlarged due to the recent “blot-on” acquisition of Southcross Energy in the Eagle Ford for $200 million and it will become bigger thanks to the $3.55 billion cash transaction. Targa’s financial position allowed it to utilize convenient opportunities to extend its company so it bought #Lucid using available cash and debt with an estimated pro forma year-end 2022 leverage around 3.5 times. According to Targa’s estimates, the acquisition of Lucid will increase the number of natural gas pipelines by 1,050 miles and add about 1.4 Bcf/d of cryogenic natural gas processing capacity in service or under construction located mainly in Eddy and Lea counties of New Mexico. The investment-grade producers source approximately 70% of current system volumes. According to the press release, a full-year standalone adjusted EBITDA is expected to be between $2.675 billion and $2.775 billion and reported year-end leverage ratio of about 2.7 times. Targa’s updated financial expectations assume NGL composite prices average $1.05 per gallon, crude oil prices average $100/bbl, and Waha natural gas prices average $6 per MMBtu for the remainder of 2022.
Your team’s ESG performance can be greatly improved applying the asset co-location analysis within upstream or midstream use cases. This has been a topic for a discussion at Rextag’s ‘Is ESG Improvement Next Door?’ webinar. We reviewed some cases like curbing gas flaring or renewable energy sourcing to power the fossil fuel infrastructure. Many combinations are available with access to the data Rextag provides on wells, acreages, power lines, substations, and such renewable infrastructure as wind turbines, methane landfills, etc.
BPPlc agreed on June 13 to exit the Canadian oil sands in an asset swap with Cenovus Energy Inc. potentially worth up to CA$1.2 billion. 50% non-operated interest in the #SunriseOilSands project will be sold by BP in an agreement reached with Cenovus Energy, a company based in Alberta. Two companies agreed on the following conditions: total consideration for the transaction includes CA$600 million in cash, additionally, a contingent payment with a maximum aggregate value of CA$600 million expiring after two years, and concerning Cenovus, it will have a 35% position in the undeveloped Bay du Nord project offshore Newfoundland and Labrador. Current production from the Sunrise Oil Sands asset is about 50,000 bbl/d and the company anticipates achieving a nameplate capacity of 60,000 bbls/d through a multi-year development program.