Crestwood Midstream Partners LP, Houston, will buy from subsidiaries of Devon Energy Corp., Oklahoma City, gathering and processing assets in southwestern Barnett shale for $90 million, the companies reported.
In addition, the firms signed a 20-year, fixed-fee gathering, processing, and compression agreement under which Crestwood will gather and process Devon’s natural gas production from a 20,500-acre section. Current gas production under the agreement is about 95 MMcfd.
The transaction is to close in the third quarter.
Being acquired from Devon are 74-miles of low-pressure gas gathering, a 100-MMcfd cryogenic processing plant, and 23,100 hp of compression in the western portion of Johnson County, Tex.
Devon’s West Johnson County pipeline and processing plant, built since 2006, are immediately adjacent to Crestwood’s Cowtown gathering, which includes the Cowtown and Corvette gas processing plants with combined processing capacity of about 325 MMcfd.
The Crestwood Cowtown and the Devon West Johnson County systems are currently interconnected, and Crestwood has processed gas from Devon’s West Johnson County system in the past.
Upon closing, Crestwood will consolidate the systems by increasing system interconnect capacity with the ultimate goal of processing all Devon’s West Johnson County gas production in Crestwood’s Cowtown and Corvette plants. The integration is to result in future—but unspecified—cost savings for Crestwood and provide Devon with lower wellhead pressures, higher NGL recoveries, and expanded market outlets.
Crestwood and Devon’s gathering, processing, and compression agreement will provide for 100% fixed-fee-based revenues to Crestwood and includes a dedicated production area from Devon of about 20,500 acres. The West Johnson County system currently gathers from about 230 wells.
Due to the liquids-rich quality of the gas produced in this portion of the Barnett shale, Devon has “maintained an active drilling and development plan” for West Johnson County this year and expects to continue to develop the properties in 2013.