CNX plans first midstream dropdown to CNX Midstream

Feb. 9, 2018
CNX Resources Corp. has entered a definitive agreement to sell its 95% interest in the Shirely-Pennsboro West Virginia wet-gas gathering system to CNX Midstream Partners LP for total cash consideration of $265 million to be financed with cash on hand and through debt financing, the companies said. 

CNX Resources Corp. has entered a definitive agreement to sell its 95% interest in the Shirely-Pennsboro West Virginia wet-gas gathering system to CNX Midstream Partners LP for total cash consideration of $265 million to be financed with cash on hand and through debt financing, the companies said.

With a current flowing production of about 180 MMcfd, the Shirley-Pennsboro system gathers and transports gas in the core wet-gas region of the Marcellus shale in West Virginia across Doddridge, Tyler, Ritchie, and Pleasant counties.

In relation to CNXM’s proposed acquisition, the companies have agreed to amend the existing gathering agreement to provide for a minimum volume commitment (MVC) with respect to the Shirley-Pennsboro system’s operating area, which was the largest growth contributor to CNX’s 2017 Marcellus shale volumes and will continue to be a growing part of CNX’s future production, according to Nicholas J. DeIuliis, chief executive officer both CNXM and CNX.

“The Shirley-Pennsboro system is already well-capitalized, and the timing of the transaction is ideal for CNXM as it is able to capture the volume growth as it executes near-term capacity expansion projects, with CNX volumes rapidly filling that capacity,” DeIuliis said.

The proposed transaction will be derisked through the MVC, which covers about 70% of CNX’s planned production in the Shirley-Pennsboro operating area, resulting in about $400 million in revenue for CNXM through 2031, as well as add $22 million to $24 million of 2018 EBITDA for CNXM on a full-year pro forma basis, with EBITDA growth expected beyond 2018, DeIuliis added.

Upon finalizing the transaction, the Shirley-Pennsboro system—currently held in CNX’s 95%-owned CNX Midstream DevCo III—will be transferred to CNXM’s wholly owned subsidiary CNX Midstream DevCo I.

CNX will continue to own 95% interests in each of CNX Midstream DevCo II LP and CNX Midstream DevCo III LP, with CNXM owning the remaining 5% in each.

Scheduled to close before to the end of this year’s first quarter, the transaction represents the initial dropdown of assets by CNX to CNXM following CNX’s January acquisition of Noble Energy Inc.’s 50% interest in the newly renamed CNXM (OGJ Online, Jan. 9, 2018).

Contact Robert Brelsford at [email protected].