KMEP to buy Petrohawk shale assets; build liquids pipeline

Christopher E. Smith
OGJ Pipeline Editor

HOUSTON, May 5 -- Kinder Morgan Energy Partners LP (KMEP) has entered into a definitive agreement to buy Petrohawk Energy Corp.’s 50% interest in KinderHawk Field Services in the Haynesville shale and a 25% interest in Petrohawk’s natural gas gathering and treating business in the Eagle Ford shale. KMEP also will build a 300,000-b/d crude-condensate pipeline to move Petrohawk Eagle Ford production to the Houston Ship Channel.

KMEP executed a long-term anchor agreement with Petrohawk to ship 50,000 b/d of condensate on the line, with the rest of the capacity available to potential third-party shippers. The company described talks with additional producers as “advanced.”

The crude-condensate line will consist of 61 miles of newbuild construction and 109 miles of existing gas pipeline being converted for liquids service. The pipeline will originate in Petrohawk's Black Hawk field near Cuero, Tex., and extend to terminaling facilities in the HSC with access to local refineries, petrochemical plants, and docks. KMEP expects the pipeline to be in service second-quarter 2012.

KMEP says HSC gas customers will not be affected by the line conversion.

KMEP paid $855 million and assumed about $65 million of debt in the acquisition and will spend roughly $220 million to build the pipeline. The acquisition will give KMEP full ownership of KinderHawk, including more than 400 miles of pipeline with more than 2 bcfd of gas capacity and throughput of more than 900 MMcfd. KMEP expects throughput to reach 1.2 bcfd by yearend.

KMEP and Petrohawk will form a 25-75 joint venture in the Eagle Ford shale owning two midstream gathering systems in and around Petrohawk's Hawkville and Black Hawk fields. The JV will consist of more than 280 miles of gas gathering pipelines and 112 miles of condensate gathering lines to be in service by yearend.

The JV will have a life-of-lease dedication of Petrohawk's reserves, and will provide Petrohawk and other area producers with gas and condensate gathering and treating, and condensate stabilization services.

The companies expect closing on the acquisitions in this year’s third quarter.

Contact Christopher E. Smith at chriss@ogjonline.com.

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