MIDSTREAM NEWS

KINDER MORGAN EXTENDS UMTP PIPELINE BINDING OPEN SEASON

Kinder Morgan Inc. is extending its current binding open season to Dec. 15 to review shipper comments and interest received to date, as well as to continue to seek commitments for the proposed $4 billion Utica Marcellus Texas Pipeline (UMTP) project, which would transport up to 430,000 barrels of natural gas liquids and condensate produced from the Utica and Marcellus basins to delivery points along the Texas Gulf Coast, including connectivity to a Kinder Morgan dock located along the Houston Ship Channel. The binding open was previously scheduled to end Sept. 15.

PHILLIPS 66, SPECTRA ENERGY PLAN JV ASSET CONTRIBUTION

Phillips 66 and Spectra Energy, 50/50 joint venture owners in DCP Midstream LLC, have entered into a nonbinding letter of intent to contribute assets to Denver, CO-based DCP Midstream. Spectra Energy has agreed to contribute its ownership interest in both the Sand Hills and Southern Hills NGL pipelines. Phillips 66 has agreed to contribute $1.5 billion in cash, which is expected to be used to pay down a portion of the DCP Midstream revolving credit facility.

The proposed transaction complements efforts at DCP Midstream to reduce operating costs, sell certain non-core assets, and convert certain contracts from commodity price sensitive to fee-based.

"DCP Midstream is a valuable portion of our NGL value chain and part of our plans to grow," said Greg Garland, chairman and CEO of Phillips 66.

The transaction, anticipated to close in the fourth quarter of this year, is subject to the parties entering into a definitive agreement and customary consents, including approval by Spectra Energy Partners' board of directors and regulatory approvals. Following this transaction, Phillips 66 and Spectra Energy will remain 50/50 joint venture owners of DCP Midstream.

WPX ON DELEVERING COURSE WITH GATHERING SYSTEM SALE

WPX Energy agreed to sell a North Dakota gathering system for approximately $185 million to a private equity fund managed by the Ares EIF Group, a subsidiary of Ares Management LP at the tail-end of August. The sale is part of WPX's delevering plan targeting $400-$500 million in divestitures by the end of 2015. WPX also is targeting another $400-$500 million in asset sales in 2016.

The sale of the North Dakota asset consists of an oil, natural gas and water gathering system. WPX previously installed the infrastructure coinciding with its drilling program in the Williston Basin.

Under the terms of the agreement, WPX will continue to operate the system which currently gathers approximately 11,000 barrels per day of oil, approximately 6,500 Mcf/d of natural gas, approximately 5,000 barrels per day of water, and can be expanded. The system supports WPX's development in the Van Hook peninsula area.

WPX produced an average of 22,600 barrels per day of oil in the Williston Basin during second-quarter 2015, up 20 percent from the same period a year ago.

Oppenheimer ananlysts say the deal came in above its >$100M estimate and believes the company is "well on course" to reach its $400-$500 million divestiture goal this year, but noted it remains cautious "due to execution risk given the elevated leverage and weak oil prices." WPX's recent acquisition of RKI saw debt/EBITDAX nearly double to roughly 4.0x, the analysts noted.

MATADOR SELLS GAS GATHERING, PROCESSING ASSETS FOR $143M

Matador Resources Co. has agreed to sell a wholly-owned subsidiary of Matador that owns certain natural gas gathering and processing assets in the Delaware Basin in Loving County, Texas (the Loving County system), to a subsidiary of EnLink Midstream Partners LP for $143 million. The transaction is expected to close in the fourth quarter of this year.

The assets include a cryogenic natural gas processing plant with 35 MMcf/d of inlet capacity (the processing plant), and six miles of high-pressure gathering pipeline which connects a Matador-owned gathering system to the processing plant, which has been operational for two weeks and is currently processing about 19 million cubic feet of natural gas per day.

In conjunction with the sale of the Loving County system, Matador will dedicate its current leasehold interests in Loving County pursuant to a 15-year, fixed-fee gathering and processing agreement and provide a volume commitment in exchange for priority-one service. Matador can, at its option, dedicate any future leasehold acquisitions in Loving County to a subsidiary of EnLink. In addition, Matador retains its natural gas gathering system up to a central delivery point and its other midstream assets in the area, including oil and water gathering systems and saltwater disposal wells. Finally, Matador has the ability to defer taxes related to the sale of the Loving County system through potential like-kind exchange transactions.

Upon closing, Matador expects to have over $500 million in liquidity including nothing drawn against its revolving credit facility borrowing base of $375 million. In addition, immediately following the closing of the transaction, Matador expects its net debt to trailing 12-month Adjusted EBITDA ratio to be approximately 1.0x.

Global Hunter Securities analysts commented, "A positive transaction for MTDR as it quickly creates value from its midstream investments in the Delaware Basin ($48MM invested in 2015). The divestiture bulks up liquidity and further strengthens the balance sheet (without selling producing assets), giving MTDR plenty of flexibility as it designs its 2016 program (we see the $143MM substantially plugging our forecast ~$200MM spending deficit in '16)."

GAS PIPELINE COMPANY WINS JUDGMENT IN CONTRACT DISPUTE WITH STEELMAKER

A Minnesota federal court has entered a $32.9 million judgment on behalf of Great Lakes Gas Transmission Limited Partnership, a Houston-based interstate natural gas pipeline company, finding that an Indian conglomerate violated the company's contract to provide natural gas transmission services. The judgment was entered on Sept. 16 by US District Judge Susan Richard Nelson, following a jury trial in Duluth.

The dispute stemmed from Mumbai-based Essar Steel Ltd.'s 2007 acquisition of Minnesota Steel Industries (MSI), which owned or controlled more than 1.4 billion tons of iron ore resources in the state's Mesabi Iron Range. Essar is an international conglomerate operating in a number of manufacturing and services sectors, including the steel industry. Following the purchase, Essar announced plans to upgrade and build a major steel-making facility in Itasca County, Minnesota, using the former MSI holdings.

Great Lakes filed suit, claiming breach of contract and anticipatory repudiation, when Essar failed to honor MSI's 15-year contract for natural gas capacity, which is essential for steel production. Essar asserted a number of defenses, including its contention that the global economic crisis excused its breach of contract. The Court disposed of each of those defenses. The case also presented a precedential issue of federal jurisdiction based on interstate gas pipeline tariffs.

Dallas, TX-based Gruber Hurst Elrod Johansen Hail Shank LLP represented Great Lakes.

ARB MIDSTREAM ACQUIRES SUNWEST CANADA ENERGY

ARB Midstream LLC, a Denver, Colorado-based midstream company, has acquired Sunwest Canada Ltd., a crude oil marketing and trading company headquartered in Calgary, Alberta. Sunwest will operate under the new name of ARB Midstream Logistics Canada ULC.

Sunwest currently markets over 20,000 b/d of crude oil through Canadian and US pipeline systems. Existing Sunwest management will be retained and will continue to oversee the Canadian operations.

The acquisition was financed in part through debt drawn on a new US$52.5 million credit facility with Macquarie Bank Ltd. and in part by an additional equity commitment from current ARB private equity sponsor, BV Natural Resources LLC. The new investment by BV Natural Resources increases their total contributions to date to over US$32.5 million and increases their total commitment to ARB Midstream to US$45.0 million.

AMERICAN MIDSTREAM CLOSES DELTA HOUSE INTEREST ACQUISITION, INCREASES REVOLVING CREDIT FACILITY

American Midstream Partners LP has closed its acquisition of a minority interest in Delta House from an affiliate of ArcLight Capital Partners LLC, which controls the general partner of the Partnership. The Partnership acquired 25% of ArcLight's 51.7% controlling interest in Delta House, a fee-based, semisubmersible floating production system and associated oil and gas export pipelines in the deepwater Gulf of Mexico.

In addition, the Partnership intends to recommend to its board of directors the resumption of annualized distribution increases of approximately 5%, beginning with the distribution for 4Q15 payable in February 2016.

The Partnership acquired the interest in Delta House for total consideration of $162 million, which equates to an adjusted EBITDA multiple of approximately 5x for the next 12 months and full-year 2016, and is immediately accretive to the Partnership's current distribution. The acquisition was funded using a combination of net proceeds from the 7.5 million common unit offering that closed Sept. 15, and borrowings under the revolving credit facility.

On Sept. 18, the Partnership executed an amendment to its revolving credit facility to increase borrowing capacity from $500 million to $750 million, with the option to further increase borrowing capacity to $900 million. The syndicate of 17 banks is led by Bank of America NA, as administrative agent, collateral agent, L/C issuer and lender. Natixis Bank, BNP, and NBH Capital Finance joined the credit facility as new lenders.

ENTERPRISE BEGINS SERVICE ON RANCHO II PIPELINE

Enterprise Products Partners LP has begun service on its Rancho II pipeline between Sealy, Texas, and the partnership's ECHO terminal in southeast Houston. The 88-mile, 36-in.-diameter pipeline will transport various grades of crude oil, condensate, and processed condensate from the Permian Basin and the Eagle Ford shale play.