Midstream News

Crestwood Expands Bakken Footprint with Arrow Acquisition

Crestwood Midstream Partners LP's wholly-owned subsidiary, Crestwood Arrow Acquisition LLC (Crestwood Arrow), has agreed to acquire Arrow Midstream Holdings LLC, a privately-held midstream company, for approximately $750 million. The acquisition marks a continuation of Crestwood's liquids-focused strategy by significantly expanding Crestwood's operational footprint in the Bakken Shale and highlights the immediate benefits of the merger of Crestwood and Inergy Midstream, which was completed on Monday, October 7, 2013.

Arrow, through its wholly-owned subsidiaries, owns and operates substantial crude oil, natural gas and water gathering systems located on the Fort Berthold Indian Reservation in the core of the Bakken Shale in McKenzie and Dunn Counties, North Dakota. The system today consists of over 460 miles of gathering pipeline including 150 miles of crude oil gathering pipeline, 160 miles of natural gas gathering pipeline, and 150 miles of water gathering lines. Current volumes on the system are approximately 50,000 barrels per day (bbls/d) of crude oil, 15 million cubic feet per day (MMcf/d) of rich natural gas and 8,500 bbls/d of water. Additionally, the acquired assets include salt water disposal wells and a 23-acre central delivery point (CDP) with multiple pipeline take-away outlets and a fully-automated truck loading facility.

The Arrow systems are located approximately 60 miles southeast of Crestwood's COLT Hub (COLT) crude rail and pipeline terminal, located in Williams County, North Dakota, and have direct connectivity with COLT through the Hiland and Tesoro crude oil pipeline systems.

"After the close of this transaction, we will be one of the largest Bakken midstream service providers servicing approximately 18% of current total Bakken crude oil production. Nationwide, we will be handling over 470,000 bbls/d of crude oil and NGLs in addition to over 2 billion cubic feet per day of natural gas through our gathering systems and transportation assets," said Robert G. Phillips, chairman, president, and CEO of Crestwood's general partner.

Citi acted as exclusive financial advisor to Crestwood. In connection with the transaction, Crestwood has secured fully-committed debt financing from Citi Global Markets Inc. and fully-committed equity financing in the form of equity consideration paid directly to the seller as well as additional equity financing from undisclosed accredited investors. There are no financing contingencies to close the transaction, which is expected in the fourth quarter of 2013.

Devon Energy, Crosstex to Create New Midstream Business

Devon Energy Corp., Crosstex Energy Inc. and Crosstex Energy LP have signed definitive agreements to combine substantially all of Devon's US midstream assets with Crosstex's assets to form a new midstream business. The new business will consist of two publicly traded entities: the Master Limited Partnership (MLP) and a General Partner (GP) entity. The new company is expected to have adjusted EBITDA of approximately $700 million in 2014, before synergies. The transaction is expected to be immediately accretive to both Crosstex and Devon. A name for the new company will be announced prior to the closing of the transaction, which is expected in 1Q14 subject to approval by the stockholders of Crosstex Energy Inc., as well as customary regulatory approvals and closing conditions.

The combined assets are located in many regions, including the Barnett Shale, Permian Basin, Cana and Arkoma Woodford, Eagle Ford, Haynesville, Gulf Coast, Utica and Marcellus. The new company will have approximately 7,300 miles of gathering and transportation pipelines, 13 processing plants with 3.3 bcf/day of net processing capacity, 6 fractionators with 165 Mbbl/day of net fractionation capacity, as well as barge and rail terminals, product storage facilities, brine disposal wells and an extensive crude oil trucking fleet.

In exchange for a controlling interest in both the new GP entity and the MLP, Devon will contribute its equity interest in a newly formed Devon subsidiary (Devon Holdings) and $100 million in cash. Devon Holdings will own Devon's midstream assets in the Barnett Shale in North Texas, the Cana and Arkoma Woodford Shales in Oklahoma and Devon's interest in Gulf Coast Fractionators in Mt. Belvieu, Texas. The MLP and the GP will each own 50% of Devon Holdings. Current stockholders of Crosstex Energy will receive one unit in the GP entity for each share of Crosstex Energy they own, as well as a one-time cash payment at closing of approximately $2.00 per share or $100 million in aggregate. Devon's contributed assets are valued at $4.8 billion in the transaction.

Devon will be the new company's largest customer. Over time, the potential exists for the General Partner to drop-down its 50% interest in Devon Holdings to the MLP.

Upon closing of the transactions, the pro forma ownership of the new GP entity will be approximately:

• 70% - Devon Energy Corp.
• 30% - Current Crosstex Energy Inc. public stockholders

Upon closing of the transactions, the pro forma ownership of the MLP entity will be approximately:

• 53% - Devon Energy Corp.
• 40% - Current Crosstex Energy LP public unitholders
• 7% - the new GP entity

The new company will be headquartered in Dallas, Texas, with a continued employee presence in Oklahoma City. The newly constituted boards of directors for the General Partner entity and the general partner of the Master Limited Partnership will each be comprised of nine directors, including five members designated by Devon. John Richels, president and CEO of Devon, will act as chairman. The executive management team of the new company will consist of senior officers from both Devon and Crosstex, led by Crosstex's Barry E. Davis as president and CEO.

BofA Merrill Lynch acted as financial advisor and Vinson & Elkins LLP acted as legal advisor to Devon. Greenhill & Co. LLC acted as financial advisor and Baker Botts LLP and Richards, Layton & Finger, PA acted as legal advisor to Crosstex. Citigroup Global Markets Inc. acted as financial advisor to Crosstex Energy. Evercore acted as financial advisor and Potter Anderson Corroon LLP acted as legal advisor to the Special Committee of the Crosstex board of directors. Simmons & Company International acted as financial advisor and Morris, Nichols, Arsht & Tunnell LLP acted as legal advisor to the Conflicts Committee of the Crosstex Energy GP LLC Board of Directors.

Outrigger Energy Receives $200M Equity Commitment

Denver, CO-based Outrigger Energy LLC has received $200 million in equity commitments from Kayne Anderson Energy Fund VI, private investor Brion G. Wise, and management. Outrigger Energy is a Denver-based midstream company that provides a full range of midstream services to crude oil and natural gas producers.

Outrigger Energy's management team is led by CEO Dave Keanini and SVP, business development Brian Jeffries. Prior to the formation of Outrigger Energy, Keanini served as president and COO of Bear Tracker Energy, where he was instrumental in the greenfield sourcing, design and development of the company's assets in North Dakota's Bakken shale and Colorado's Niobrara shale prior to its sale. Previously, he was general manager of Rockies Midstream for Anadarko Petroleum Corp.

Rock River to Build Crude Oil Processing Plant in Utah

Rock River Resources will build a new crude oil processing plant and rail terminaling facility in Green River, Utah. The Emery project will require a capital investment of over $230 million and will provide a long-term viable crude processing option in the region.

The first phase of the project is planned to break ground in 2013 and will be operational in 2014. It is expected to employ up to 300 workers at peak construction and once all phases are completed roughly 125 operational jobs will be created.

According to the company, the Emery project will use emission control technologies that will enable the facility to meet emission limits that are among the most stringent ever required for a refinery of this design. The company expects, due to minimal emissions, the facility to be classified as a "Minor Source" by the State of Utah.

The first segment of the project will include a terminaling and rail loading facility that will provide services for local producers for crude terminaling. The terminaling facility is projected to be operational in 2014. The second segment of the project will be a 10,000 barrel per day topping plant that will process local crudes and condensates into naptha, fuel oil, diesel and jet fuel. The topping plant should be operational by mid-2015. The final segment of the project will be a processing plant for regional wax crudes that will produce refined paraffin waxes and lube oils. The wax plant should be operational by mid-2016.

Briefs

Pembina Closes on C$150M Offering

Pembina Pipeline Corp. closed its previously announced public offering of 6,000,000 cumulative redeemable rate reset class A preferred shares, series 3 for aggregate gross proceeds of C$150 million.

Proceeds from the offering will be used to partially fund capital projects, to reduce short-term indebtedness and for other general corporate purposes of the company and its affiliates.

Venture Gains LNG Export Approval

Venture Global LNG has obtained export authorization from the US Dept. of Energy to export up to 243.6 bcf/year of domestically produced LNG to countries that have Free Trade Agreements with the US. Venture Global has proposed the exports from a terminal on the Calcasieu Ship Channel in Cameron Parish, LA.