Enterprise Products Partners LP (EPP), Houston, executed agreements to purchase all interests in EFS Midstream LLC from affiliates of Pioneer Natural Resources Co., Irving, Tex., and Reliance Industries Ltd., Mumbai, for $2.15 billion.
The EFS Midstream business was formed in 2010. At the time of the sales agreement, Pioneer operated the Eagle Ford midstream joint venture with 50.1% interest. Reliance held 49.9%.
Cynthia Pross, IHS Energy midstream energy transactions analyst, and Sven Del Pozzo, director, Energy Insights, IHS Energy, noted the transaction's price set a "new premium for midstream assets" and was the largest amount paid for midstream assets in 2015 as of June 10.
"This indicates an increasingly competitive market for midstream assets for master limited partnerships (MLPs) in US unconventional plays, particularly ones as highly valued as the Eagle Ford, even after the drop in commodity prices," Pross said.
She noted the deal strengthened Enterprise's position as a dominant midstream service provider in South Texas.
Del Pozzo said the transaction continued a multiyear trend of oil and gas companies to divest noncore midstream assets so that they could use the sale proceeds on upstream projects.
"We expect the process could become more urgent with the drop in earnings from the fall in commodity prices," Del Pozzo said. Pioneer announced it would redeploy capital toward its horizontal drilling program in the Permian Spraberry. (See story this issue, p. 24).
Transaction logistics
EFS Midstream provides gas gathering, treating, compression, and condensate processing in the Eagle Ford shale and includes about 460 miles of natural gas gathering pipelines, 10 central gathering plants, 780 MMcfd gas treating capacity, and 119,000 b/d of condensate stabilization capacity.
EPP paid $1.15 billion at closing and was to pay the final $1 billion by the first anniversary of the closing.
Under the agreement's terms, the Pioneer and Reliance joint development agreed to dedicate Eagle Ford production to EPP under a 20-year, fixed-fee gathering agreement.
The gathering agreement includes a minimum volume requirement for the first 7 years.
Pioneer and Reliance also agreed to related 20-year fee-based agreements with EPP for gas processing, NGL transportation and fractionation, and for condensate handling and crude oil transportation services.
Pioneer forecast 2015 cash flow from the assets would be $100 million net to its 50.1% interest.
