Global Infrastructure Partners (GIP), a private equity firm, agreed to acquire 50% interest in Bakken midstream assets from Hess Corp. for $2.7 billion and to form a 50-50 midstream joint venture named Hess Infrastructure Partners (HIP).
The deal was expected to close in the third quarter. The joint venture partners planned to incur a $600-million loan, with proceeds distributed equally to both partners. The leveraging was expected to result in total after-tax cash proceeds of $3 billion net to Hess.
Hess midstream assets to be included in the joint venture included:
• 250-MMcfd natural gas processing plant in Tioga, ND (OGJ Online, May 21, 2014).
• Railroad terminal in Tioga and associated train cars.
• Crude oil truck and pipeline terminal in Williams County, ND.
• Propane storage cavern along with a rail and truck loading facility in Mentor, Minn.
• Crude oil and gas gathering systems in North Dakota.
MLP plans continuing
Hess planned to operate the pending JV assets as a contract service provider, and current employees working the midstream assets were to remain Hess employees.
Last year, Hess announced plans to form a Bakken midstream master limited partnership (OGJ Online, July 30, 2014).
The new joint venture planned to pursue the initial public offering of Hess Midstream Partners, the MLP subsidiary. Hess filed an initial S-1 on behalf of the MLP in September 2014.
"The joint venture with its strategically located assets will be one of the largest midstream operators in the Bakken," said John Hess, Hess Corp. chief executive officer. "By capitalizing on the financial strength and midstream energy experience of [GIP], the joint venture will be in a strong position to fund future energy infrastructure investments and continue to grow its midstream business."
Hess said it would use proceeds from the deal to "preserve the strength of its balance sheet in the current oil price environment, provide additional financial flexibility for future growth opportunities, and continue to repurchase stock on a disciplined basis."
The midstream segment reported first-quarter net income of $27 million. Hess expected capital expenditures to be funded by the joint venture on a 100% basis for the 12 months ending Mar. 31, 2016, to be $325-350 million.
HIP's board will consist of six directors, with three members elected by Hess and three by GIP. Pursuant to the agreement, Hess, through its elected directors, will retain control of the midstream assets' operations and annual budgeting process.
Other decisions, such as capital structure, debt, and equity offerings, and new contracts were to be decided through joint approval by directors elected by both Hess and GIP.
