Altus, EagleClaw merge to create pure-play Permian midstream company

Oct. 22, 2021
Altus Midstream Co. will combine with privately-owned BCP Raptor Holdco LP in an all-stock transaction that would create a pure-play Permian basin midstream company with an anticipated enterprise value of $9 billion.

Altus Midstream Co. will combine with privately-owned BCP Raptor Holdco LP in an all-stock transaction that would create a pure-play Permian basin midstream company with an anticipated enterprise value of $9 billion.

BCP is the parent company of EagleClaw Midstream, which includes EagleClaw Midstream Ventures, the Caprock Midstream and Pinnacle Midstream businesses, and a 26.7% interest in the Permian Highway Pipeline.

The combine would mix earnings from midstream gathering and processing and long-haul pipeline transportation, operating some 2 bcfd of newly constructed cryogenic natural gas processing infrastructure in the Delaware basin with more than 850,000 acres under fee-based, long-term dedications for midstream activities, Altus said in a release Oct. 21. The pro forma company will hold interests in four contracted Permian export pipelines, including a 53% majority interest in the Permian Highway Pipeline, a 16% interest in the Gulf Coast Express natural gas pipeline, and a 33% interest in the Shin Oak NGL Pipeline. Altus also holds a 15% interest in the EPIC Crude Pipeline, which connects the Permian and Eagle Ford basins to Corpus Christi.

Altus will issue 50 million Class C common shares (and its subsidiary, Altus Midstream LP will issue corresponding common units) to BCP’s unitholders, principally funds affiliated with Blackstone and I Squared Capital, resulting in combined ownership of about 75% of the pro forma company. The ownership by Apache Midstream LLC, a subsidiary of Apache Corp., will be reduced to about 20%, and existing Altus public shareholders will own about 5% of the combined company.

Apache will continue as a natural gas gathering and processing customer of the combine and recently executed an amendment to its commercial agreements with Altus that incentivizes activity in the Delaware basin. Apache is currently assessing the addition of drilling and completion activity in Alpine High in its 2022 capital budget.

Structure, synergies

The yet-unnamed company will operate in two segments—midstream logistics and pipeline transportation—and maintain its headquarters in Midland with corporate leadership in Houston.

The management team will be led by Jamie Welch, EagleClaw Midstream’s president and chief executive officer. Apache field personnel working at Altus Midstream facilities will be offered employment with the pro forma enterprise. The board will comprise 11 members: the chief executive officer, four independent directors, three designees of Blackstone, two designees of I Squared, and a designee of Apache.

The company expects to achieve at least $50 million of annual EBITDA synergies, with total integration spend of less than $100 million spread over the next 3 years. Capital synergies from combining the systems are estimated to be more than $175 million in the 5 years post-closing.

The transaction is expected to close in first-quarter 2022, following completion of customary closing conditions, including Altus shareholder approval and regulatory reviews. Apache currently owns about 79% of Altus and has agreed to vote in favor of the deal.