Summit Midstream makes DJ basin acquisitions

Oct. 17, 2022
Summit Midstream Holdings LLC, a subsidiary of Summit Midstream Partners LP, will expand its Denver-Julesburg basin assets through acquisitions totaling $305 million in cash.

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.

The gathering agreements for Outrigger DJ system include long-term, fee-based contracts with a weighted average term of over 10 years. Volume throughput on the Outrigger DJ system is underpinned by acreage dedications, with an estimated 310,000 leased acres from its key customers, including Mallard Exploration and other producers 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 commercial contract portfolio includes long-term, fee-based and percentage-of-proceed agreements with a weighted average term of over 11 years. Volume throughput on the Sterling DJ system is underpinned by acreage dedications, with an estimated 170,000 leased mineral acres attributable to several 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, and chairman of Summit, said the deal will “[enhance] the quality and availability of services for the combined customer base in the region via the integration of our 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 is poised to grow as more than 675 active permits are currently held on dedicated acreage.

The transactions are expected to close during the fourth quarter of 2022, subject to customary regulatory approvals.