AMP acquires Costar Midstream for $470 million

Oct. 15, 2014
American Midstream Partners LP (AMP), Denver, has acquired Costar Midstream LLC from Energy Spectrum Partners VI LP and Costar management for $470 million. The deal closed Oct. 14.

American Midstream Partners LP (AMP), Denver, has acquired Costar Midstream LLC from Energy Spectrum Partners VI LP and Costar management for $470 million. The deal closed Oct. 14.

Costar’s operating assets include two gas gathering, processing, and fractionation facilities in East Texas; the Yellow Rose gas gathering and cryogenic processing system as well as an off-spec condensate treating plant under construction in the Permian basin; and an oil gathering system in the Bakken shale.

Costar’s senior management team will join AMP to complete the existing Costar development projects, source additional growth opportunities associated with the Costar assets, and join the partnership’s existing corporate and business development teams.

East Texas

Longview provides gas gathering and processing services with 55 MMcfd of cryogenic processing capacity in Gregg County, Tex. Longview also provides NGL fractionation through an 8,500 b/d fractionator and off-spec condensate treating services.

Chapel Hill, 20 miles west of Longview in Smith County, Tex., provides gas gathering and processing services with 20 MMcfd of cryogenic processing capacity and a 2,000 b/d fractionator.

Costar is developing a manifest rail facility on a 400-acre site adjacent to Longview that will increase Costar’s access to third-party upstream supply and downstream markets for its condensate treating services. The rail facility is expected to be operational in second-half 2015.

Permian basin

Costar operates the 40-MMcfd Yellow Rose gas gathering and cryogenic processing system in Martin County, Tex. The system commenced operations in September and is supported by a long-term dedication of more than 30,000 acres from the anchor producer customer.

AMP says production behind the plant is expected to increase over the next several years as the anchor and other producers begin horizontal drilling of the Permian acreage served by Yellow Rose.

Costar also is constructing an off-spec condensate treating plant in the Permian, similar to the treating facility at Longview, in a joint venture with an unspecified industry partner. The Permian off-spec treating facility is expected to be operational in early 2016.

Bakken shale

Costar is constructing an oil gathering system in McKenzie County, ND, that’s expected to begin initial operations in this year’s fourth quarter or first-quarter 2015. The pipeline will have operating capacity of more than 40,000 b/d, with a downstream connection to the Tesoro Logistics pipeline and the ability to accept volumes via truck.

The gathering system is supported by a long-term dedication of 24,000 acres from the system’s anchor producer customer. AMP says Costar is nearing execution of gathering and transportation agreements with other producers in the area, and will have the ability to source additional supply from outside the gathering system’s footprint through its truck-unloading facilities.

AMP expects to invest $70-80 million over the next 12-18 months to complete the Bakken, Longview rail, and Permian off-spec condensate blending development projects.