Crestwood buys Arrow Bakken gathering systems for $750 million

Crestwood Midstream Partners LP’s wholly owned subsidiary Crestwood Arrow Acquisition bought Bakken-shale gathering company Arrow Midstream Holdings LLC in a deal valued at $750 million. The acquisition followed the Oct. 7 completion of the merger between Crestwood and Inergy Midstream. Arrow owns and operates crude oil, natural gas, and water gathering systems in the Fort Berthold Indian Reservation in the core of the Bakken shale, McKenzie and Dunn Counties, ND.

The Arrow system consists of more than 460 miles of gathering pipeline, including 150 miles of crude oil gathering line, 160 miles of gas gathering line, and 150 miles of water gathering lines. Current volumes on the system are roughly 50,000 b/d crude oil, 15 MMcfd rich natural gas, and 8,500 b/d water. Over the next 18-24 months the company expects to reach targeted operational capacities of 125,000 b/d of crude, 100 MMcfd of gas, and 40,000 b/d of water.

The acquired assets also include saltwater disposal wells and a 23-acre central delivery point (CDP) with multiple pipeline take-away outlets and a fully automated truck loading terminal.

The Arrow gathering systems are anchored by long-term, primarily fee-based, gathering contracts with producers that have dedicated more than 150,000 acres to Arrow, including more than 1,000 potential drilling sites. Eight drilling rigs are currently active in the area, with additional rig activity occurring in areas immediately adjacent to the systems.

The Arrow systems are about 60 miles southeast of Crestwood’s 120,000-b/d COLT Hub crude rail and pipeline terminal in Williams County, ND, and have direct connectivity with COLT through the Hiland and Tesoro crude oil pipeline systems. Crestwood acquired COLT through the Inergy merger. The hub delivers Bakken crude to both East Coast and West Coast markets and is being expanded to 160,000 b/d. Many of Crestwood’s largest customers at COLT are also major purchasers of crude oil at the Arrow CDP.

Crestwood said the acquisition would make it midstream services provider to about 18% of the Bakken shale region’s crude production. Arrow expects to complete an expansion of its gas gathering capacity to capture current flared natural gas volumes by yearend the year.

Earlier this year Crestwood acquired Jackalope Gas Gathering Services LLC, which is active in the Powder River basin Niobrara shale play in Converse County, Wyo. (OGJ Online, June 24, 2013).

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

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