Summit Midstream makes DJ basin acquisitions

Nov. 7, 2022

Summit Midstream Holdings LLC, a subsidiary of Summit Midstream Partners LP, will expand its Denver-Julesburg basin (DJ basin) assets through acquisitions totaling $305 million in cash.

The company agreed to acquire Outrigger DJ Midstream LLC from Outrigger Energy II LLC and to acquire Sterling Energy Investments LLC, Grasslands Energy Marketing LLC, and Centennial Water Pipelines LLC from Sterling Investment Holdings LLC.

Outrigger assets, in Weld County, Colorado, are comprised of a 60 MMcfd cryogenic natural gas processing plant, about 70 miles of low-pressure natural gas gathering lines, 90 miles of high-pressure natural gas gathering lines, 12,800 horsepower of field and plant compression, and about 30 miles of crude oil gathering pipelines.

Gathering agreements for the Outrigger DJ system include long-term, fee-based contracts with a weighted average term over 10 years. Volume throughput is underpinned by acreage dedications with an estimated 310,000 leased acres from key customers, including Mallard Exploration and others in the region. Outrigger DJ delivers residue gas to Cheyenne Plains, natural gas liquids to the Phillips 66 NGL System, and crude oil to Pony Express Pipeline.

The Sterling DJ assets, in Weld, Morgan, and Logan Counties, Colorado, and Cheyenne County, Nebraska, are comprised of three cryogenic processing plants with nameplate capacity of 100 MMcfd, some 450 miles of natural gas gathering lines, 8,500 horsepower of field compression, freshwater rights, and 40 miles of subsurface freshwater delivery infrastructure.

Sterling DJ’s contract portfolio includes long-term, fee-based and percentage-of-proceed agreements with a weighted average term over 11 years. Volume throughput on the system is underpinned by acreage dedications, with an estimated 170,000 leased mineral acres attributable to DJ basin producers. Sterling DJ delivers residue gas to Cheyenne Plains, Southern Star, and Trailblazer and natural gas liquids to Overland Pass.

Dedicated acreage spans productive, oil prone areas within the basin, with producers primarily targeting the Niobrara and Codell formations.

Heath Deneke, president, chief executive officer, said the deal enhances availability of services via integration of the underutilized Hereford gathering and processing system with the capacity constrained Sterling DJ and Outrigger DJ systems.

Outrigger DJ and Sterling DJ customers are expected to connect over 75 new wells in 2023, he said, and development activity could grow with over 675 active permits held on dedicated acreage.