Nov. 21, 2017
Select midstream news items as appeared in the November 2017 issue of OGFJ

Rio Grande LNG, Cameron County agree to property tax incentives

Rio Grande LNG LLC, a wholly-owned subsidiary of NextDecade Corp., a liquefied natural gas (LNG) development company focused on LNG export projects, has executed agreements with Cameron County, Texas to receive Chapter 312 tax incentives for its proposed Rio Grande LNG export project at the Port of Brownsville.

The tax abatement agreements are aligned with distinct phases of the project and provide for the full abatement of County property taxes for each phase's first 10 years of operations. Subject to a positive final investment decision, Rio Grande LNG agrees to pay $2.7 million in payments-in-lieu-of-taxes during each year of tax abatement for all phases. Additionally, the Rio Grande LNG agrees to provide up to $10 million to fund community projects and to maximize the hiring of local residents during construction and operations.

Currently one of the largest proposed private investments in the State of Texas, Rio Grande LNG and its associated Rio Bravo Pipeline could invest more than $15 billion in the County. At full build-out, the proposed facility and pipelines are expected to create approximately 6,000 direct jobs during construction; more than 250 permanent jobs at the facility during operations; and more than 3,000 indirect permanent jobs in the County.

The Rio Grande LNG project is in the advanced stages of its regulatory approval process with the US Federal Energy Regulatory Commission and hopes to receive all necessary approvals by mid-2018, allowing for a final investment decision later that year and first LNG in 2022. The terminal is to be engineered and constructed by CB&I, and will utilize a design based on equipment supplied by Air Products and Chemicals Inc. and Baker Hughes GE.

Encana starts up second Montney plant

Encana started up the Sunrise processing plant on September 27. Sunrise is the second of three processing plants that support Encana's condensate-focused growth plan in the Montney. In parallel with the Sunrise and Tower facilities ramping up, the third plant, Saturn remains ahead of schedule and is on track to start up before year-end. In addition, the Towerbirch lateral pipeline which connects all three plants to the NGTL system started up on October 1.

Encana's midstream agreement with Veresen Midstream enables Encana, via the Cutbank Ridge Partnership, to construct and operate the Tower, Sunrise and Saturn plants, as well as any future build opportunities, on behalf of Veresen Midstream on a contracted basis. Veresen Midstream funds and owns the facilities and Encana pays to use them through a fee-for-service agreement.

Brazos Midstream acquires natural gas gathering system in Delaware Basin

Brazos Midstream Holdings LLC subsidiaries have closed on the purchase of a natural gas gathering system from Callon Petroleum Co. As part of the acquisition, Brazos signed a long-term, fee-based agreement with Callon for gas gathering and processing services for acreage under development in Ward and Pecos counties in the Southern Delaware Basin. Including the Callon dedication, Brazos' midstream infrastructure is anchored by long-term acreage dedications covering approximately 240,000 acres with Permian operators.

The acquired natural gas gathering system will connect to Brazos' existing system and the previously announced Comanche II natural gas processing plant. When complete in January 2018, Brazos' total operated processing capacity will be 260 MMcf/d. In addition, Brazos is accelerating plans to build a third natural gas processing plant, Comanche III, to meet continued volume growth in the region. The company has secured a site for the plant and will begin construction in early 2018.

Mustang Fuel makes $65M midstream investment

Oklahoma-based Mustang Fuel Corp.'s midstream subsidiary, Mustang Gas Products LLC (MGP), is undertaking a $65 million capital program aimed at increasing the capacity, efficiency, and reach of its midstream assets.

Within the next 18 months, the company anticipates its capital spending program to result in increased system-wide gathering capability and increased plant capacity - to more than 225 million cubic feet per day (MMCFD). Scheduled improvements include upgrading horsepower, replacing older equipment, installing new pipe and adopting new technologies for process, efficiency and control enhancements.

MGP currently operates a system consisting of four cryogenic gas processing plants, a straddle plant, over 4,200 miles of pipe and 110,000 horsepower of compression spread over 10 counties in central and north central Oklahoma. The majority of MGP's footprint is in Oklahoma's STACK play and is concentrated in Kingfisher, Blaine, Canadian, Garfield, and Major counties, where MGP gathers gas from nearly 2,000 sections. MGP can currently process up to 175 MMCFD and offers both high-pressure and low-pressure gathering. MGP connects to multiple pipelines and has contracted for 70 MMCFD of firm takeaway capacity.

Copperbeck Energy sees commitment from Tailwater Capital

Copperbeck Energy Partners LLC has received an equity commitment from Tailwater Capital, an energy-focused private equity firm based in Dallas, Texas. Copperbeck is focused on providing midstream and downstream-adjacent infrastructure and services for refineries, petrochemical, and industrial concerns. Copperbeck recently closed the purchase of a 62.5% interest in Saconix LLC from MRMC. Saconix combines MRMC's contribution of Martin Product Sales LLC's sulfuric acid business with the addition of Copperbeck to help drive growth through new equity investment. The business continues to be headquartered in Roswell, Georgia with all employees retained in their existing roles. MRMC will continue to own a 37.5% interest in Saconix. Copperbeck was represented by Gardere Wynne Sewell LLP. Thompson & Knight LLP advised Tailwater Capital.

Pin Oak Corpus Christi Closes on GMCC acquisition

Pin Oak Corpus Christi LLC has closed on the acquisition of 100% of the equity interests in Gravity Midstream Corpus Christi LLC (GMCC) from EnCap Flatrock Midstream, a venture capital firm based in San Antonio. The owners of Pin Oak Terminals LLC, Dauphine Midstream LLC, and Mercuria Energy Group Ltd. provided equity financing for the transaction. Dauphine and Mercuria also recently commissioned a new liquids terminal in Mt. Airy, Louisiana, Pin Oak Terminals, which has approximately four million barrels of contracted capacity.

Pin Oak Corpus Christi is currently operational with pipeline connections into nearby refineries, 737,500 barrels of storage, a crude processing unit, a polymer modified asphalt plant, rail loading and unloading facilities, a truck rack, and access to Aframax and barge docks. There are long-term contracts in place to expand the terminal's operations. Dauphine is a portfolio company of Pelican Advisors LLC.

BP Energy Partners to sell Pinnacle Midstream to I Squared Capital

Dallas, TX-based BP Energy Partners LLC (BPEP) and I Squared Capital have entered into a definitive agreement by which BPEP will sell Houston, TX-based Pinnacle Midstream LLC, a portfolio company of BPEP, to I Squared Capital through its ISQ Global Infrastructure Fund II. Pinnacle is a provider of crude and natural gas gathering, natural gas processing and related midstream solutions in the Delaware portion of the Permian Basin of West Texas.

RBC Capital Markets served as the exclusive financial advisor to Pinnacle in the transaction and Thompson & Knight LLP served as legal counsel to BPEP.

Crestwood closes buy-in option with Shell Midstream

Crestwood Equity Partners LP has closed on the previously announced equity option agreement with Shell Midstream Partners LP, a master limited partnership formed by Royal Dutch Shell plc, to purchase a 50% equity interest in Crestwood Permian Basin LLC which owns the Nautilus gas gathering system. The other 50% equity interest continues to be owned by Crestwood Permian Basin Holdings LLC. The Nautilus system gathers the majority of Shell's operated Delaware Basin gas under a 20-year tiered, fixed-fee contract. Crestwood Permian Basin Holdings LLC is a 50%/50% joint venture between Crestwood Equity Partners LP and First Reserve.

Venture Global LNG closes $108.6M private placement

Venture Global LNG Inc. has raised additional capital of approximately $108.6 million, marking its seventh round of equity investment. This Reg. D private placement brings the company's aggregate funding total to $470 million. The transaction proceeds will fund Venture Global LNG's continued development activities for its proposed LNG export facilities in Louisiana. The company is developing both the 10 MTPA Calcasieu Pass facility on the Gulf of Mexico and the 20 MTPA Plaquemines LNG facility in Plaquemines Parish. Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC assisted the company in connection with the private placement.

BP Midstream Partners begins public trading priced below expectations

BP Midstream Partners LP, a limited partnership formed by an indirect, wholly-owned subsidiary of BP plc, priced its initial public offering at $18.00 per common unit, below the range of $19-$20 BP noted weeks prior. With the 42.5 million common units for sale, the IPO could rack up $765 million dollars for the Houston-based company. Underwriters of the offering have a 30-day option to purchase up to an additional 6,375,000 common units from BP Midstream Partners.

The common began trading on the New York Stock Exchange on October 26, 2017 under the ticker symbol "BPMP."

At the closing of the offering, the public will own an approximate 40.6% limited partner interest in BP Midstream Partners, or an approximate 46.7% limited partner interest if the underwriters exercise in full their option to purchase additional common units. BP plc, through its indirect subsidiaries, will own the remaining limited partner interest in BP Midstream Partners, as well as its general partner and incentive distribution rights.

Citigroup, Goldman Sachs and Morgan Stanley acted as joint book-running managers. Barclays, Credit Suisse, JP Morgan, and UBS Investment Bank also acted as joint book-running managers. Citigroup acted as sole structuring agent for the offering.

TransCanada terminates proposed pipeline projects, plans Ontario
Solar Portfolio sale

TransCanada Corp. will no longer proceed with its proposed Energy East Pipeline and Eastern Mainline projects.

In a prepared statement released October 5, TransCanada president and CEO Russ Girling said, "After careful review of changed circumstances, we will be informing the National Energy Board that we will no longer be proceeding with our Energy East and Eastern Mainline applications. TransCanada will also notify Quebec's Ministè;re du Developpement durable, de l'Environnement, et Lutte contre les changements climatiques that it is withdrawing the Energy East project from the environmental review process."

Girling said the company will continue to focus on its $24 billion near-term capital program, which, he detailed, "is expected to generate growth in earnings and cash flow to support an expected annual dividend growth rate at the upper end of an eight to 10% range through 2020."

As a result of its decision not to proceed with the proposed projects, TransCanada is reviewing its approximate $1.3 billion carrying value, including allowance for funds used during construction (AFUDC) capitalized since inception and expects an estimated $1 billion after-tax non-cash charge will be recorded in the company's fourth quarter results. TransCanada stopped capitalizing AFUDC on the project effective August 23, 2017, as disclosed on September 7, 2017. In light of the project's inability to reach a regulatory decision, no recoveries of costs from third parties are expected.

Later, on October 27, the company noted an agreement to sell its Ontario solar portfolio comprised of eight facilities with a total generating capacity of 76 megawatts to Axium Infinity Solar LP, a subsidiary of Axium Infrastructure Canada II LP, for approximately $540 million.

Phillips 66 makes $2.4B deal
for Bakken Pipeline JV interests, Merey Sweeny

Phillips 66 Partners LP has reached an agreement with Phillips 66 to acquire its 25% interest in each of Dakota Access LLC and Energy Transfer Crude Oil Company LLC (collectively, the Bakken Pipeline) and 100% interest in Merey Sweeny LP (MSLP), the owner of fuel-grade coke processing units at the Phillips 66 Sweeny Refinery.

The total transaction value of $2.4 billion includes $625 million in proportional non-consolidated, non-recourse Bakken Pipeline debt and $100 million of MSLP debt. The value reflects an approximate 8.9 times multiple, based on the acquired assets' forecasted full year 2018 adjusted earnings before interest, taxes, depreciation and amortization of approximately $270 million.

Consideration for the acquisition is $1.7 billion and is expected to be funded through a combination of debt, proceeds from a private placement of equity units, and PSXP units issued to Phillips 66. As part of the transaction, the partnership will assume certain Phillips 66 term loans and notes payable to Phillips 66, which the partnership expects to repay with a combination of proceeds from the private placement of equity and long-term debt. The partnership will also issue $240 million in new PSXP units to Phillips 66, allocated proportionately between common units and units issued to the general partner to maintain its 2% general partner interest.

ExxonMobil acquires Delaware Basin terminal

Exxon Mobil Corp. has acquired a crude oil terminal in Wink, Texas from Genesis Energy LP. The terminal is located in the Delaware Basin. The terminal is positioned to handle Permian Basin crude oil and condensate for transport to Gulf Coast refineries and marine export terminals. The facility is interconnected to the Plains Alpha Crude Connector pipeline system, and is permitted for 100,000 b/d of throughput with the ability to expand. This acquisition marks ExxonMobil's first terminal in the Permian Basin to be anchored by the corporation's newly acquired Delaware Basin acreage, announced in January.

Eureka Midstream Holdings enters new structure

Eureka Midstream Holdings LLC has a new ownership structure. Blue Ridge Mountain Resources Inc. (BRMR), formerly known as Magnum Hunter Resources, entered into a definitive agreement to divest 100% of its equity investment in Eureka Midstream. BRMR formerly had an equity partnership in the company with Morgan Stanley Infrastructure Inc. (MSI). MSI has entered into a new partnership in the company with SK Holdings Co. Ltd. (SK). SK now has a direct ownership interest in the company.

ETP closes HoldCo interest sale

Energy Transfer Partners LP's wholly owned subsidiaries, Energy Transfer Interstate Holdings LLC (ETIH) and ET Rover Pipeline LLC (HoldCo), have closed the sale of a 49.9% interest in HoldCo. HoldCo owns a 65% interest in Rover Pipeline LLC. As a result of this closing, HoldCo is now owned 50.1% by Energy Transfer and 49.9% by Blackstone Energy Partners.

Phase 1A of the Rover Pipeline now transports more than one bcf/d of natural gas from Cadiz, Ohio to Defiance, Ohio. Upon full completion, the Rover Pipeline will be an approximately 713 mile pipeline designed to transport 3.25 bcf of natural gas per day from the Marcellus and Utica Shale production areas to markets across the US and into Union Gas Dawn Hub in Ontario, Canada.