Resolute hopes to monetize Delaware Basin midstream assets
In its quarterly report dated May 9, Resolute Energy CEO Nicholas J. Sutton reiterated the company's hope to sell midstream assets in the Delaware Basin. "After the completion of a thorough process, we have identified our preferred counterparty and are in discussions with the objective of completing a transaction in the second quarter," he said. Previous asset sales improved the balance sheet, allowing the company to restart drilling in the Delaware Basin. Three wells drilled in the area came in at 1,552, 1,551 and 2,464 boe/d, helping to move production to from the region to 4,500 boe/d-up roughly 50% from the 1Q16 average in 1Q16 to 4,500 boe/day. The results kick off the drilling program on a high note, said Wunderlich Securities analysts in a note May 16, 2016. Now, note the analysts, the company is looking to sell midstream assets in 2Q16 from the region "to continue improving its balance sheet and/or provide capital to remain active on its assets."
NextDecade Files application for Rio Grande LNG, Rio Bravo Pipeline
NextDecade LLC, a development and management company of liquefied natural gas (LNG) projects, has filed an application with the US Federal Energy Regulatory Commission (FERC) for authorization to site, construct and operate Rio Grande LNG, a proposed 27 Mtpa LNG export facility near Brownsville, Texas and the Rio Bravo Pipeline, a 137-mile pipeline system that will provide the facility with its feed gas.
In November 2015, NextDecade noted signing non-binding agreements for 14 Mtpa of LNG with customers from across Asia and Europe. Since then, that number has grown to 26 Mtpa.
NextDecade expects to receive authorization from the FERC by the end of the first quarter of 2017 and expects to begin exporting LNG from Rio Grande LNG by the end of 2020.
Pending FERC approval and FID, the project is expected to create between 4,000 and 6,000 construction jobs, and more than 200 permanent jobs, reflecting a potential investment of up to $20 billion. At full build-out, the Rio Grande LNG facility will be one of the largest LNG export facilities in the world.
Sempra closes sale of Rockies Express Pipeline stake
Sempra US Gas & Power, a unit of Sempra Energy, has completed the previously announced transaction with Tallgrass Energy Partners LP to sell Sempra US Gas & Power's 25% interest in Rockies Express Pipeline LLC (REX) for approximately $440 million in cash.
Rockies Express Pipeline LLC is a Delaware limited liability company engaged in the ownership and operation of the Rockies Express Pipeline, a 1,712-mile natural gas transmission pipeline that extends from Opal, Wyoming, and Meeker, Colorado, to Clarington, Ohio, and is one of the largest natural gas pipelines ever constructed in North America. A wholly owned subsidiary of Tallgrass Development LP operates the pipeline.
EVX Midstream Partners to build Eagle Ford water gathering system
EVX Midstream Partners LLC (EVX) has entered into a definitive agreement to build a produced water gathering system in the Eagle Ford oil window. The gathering system and surrounding facilities (EVX South Texas) will be underpinned by a fee-based, 15-year agreement that includes a 72,000-acre dedication in La Salle, Frio, and Atascosa Counties, Texas. Construction of the system will begin in May and is expected to be placed into service in the fourth quarter of 2016.
The Woodlands, TX-based EVX is currently evaluating multiple expansion opportunities for the water system, as well as potential crude oil and natural gas projects.
EVX Midstream Partners LLC, a midstream development company focused on acquiring, developing and operating crude oil, natural gas, and produced water gathering, processing, treating and transportation assets in the Eagle Ford, Permian Basin, and Mid-Continent, was founded in partnership with Five Point Capital Partners LLC.
Shell Midstream Partners acquires Additional Onshore Asset interests
Shell Midstream Partners LP has agreed to acquire additional equity interests in Zydeco Pipeline Company LLC, Bengal Pipeline Company LLC, and Colonial Pipeline Company from Shell Pipeline Company LP, a wholly owned subsidiary of Royal Dutch Shell plc, for $700 million. The acquisition will increase Shell Midstream Partners' interests in Zydeco to 92.5%, Bengal to 50.0%, and Colonial to 6.0%.
The acquisition price reflects an approximate 8.8 times multiple of the contributed interests' forecasted next twelve months adjusted earnings before interest, taxes, depreciation and amortization. The acquisition will be effective April 1, 2016 and is expected to be immediately accretive to unitholders.
Shell Midstream Partners expects to fund the acquisition with a combination of proceeds from a capital markets transaction, borrowings under its revolving credit facilities and cash on hand. The acquisition is expected to close on or about May 23, 2016, subject to customary closing conditions.
The terms of the acquisition were approved by the conflicts committee of the board of directors of the general partner of Shell Midstream Partners, which is composed entirely of independent directors. The conflicts committee was advised by Evercore Group LLC as to financial matters and Andrews Kurth LLP as to legal matters.
Husky to sell partial interest in select midstream assets for $1.7B
Husky Energy has agreed to sell 65% of its ownership interests in select midstream assets in the Lloydminster region of Alberta and Saskatchewan to Cheung Kong Infrastructure Holdings Ltd. and Power Assets Holdings Ltd. (PAH). Husky will receive $1.7 billion of gross cash proceeds, will have a 35% interest in the assets and will remain operator. The sale price represents about 13 times the expected 2016 EBITDA of approximately $180 million.
CEO Asim Ghosh said The partners are aligned with expanding Husky's heavy oil business and have the funding capacity to build the midstream infrastructure requirements associated with the planned construction of additional Lloyd thermal projects in Saskatchewan and Alberta."
The assets involved in the transaction include approximately 1,900 kilometers of pipeline in the Lloydminster region, 4.1 million barrels of oil storage capacity at Hardisty and Lloydminster, and other ancillary assets. A new limited partnership will be formed of which Husky will own 35%, Cheung Kong Infrastructure 16.25%, and PAH 48.75%. The transaction is subject to regulatory approval.
RBC Capital Markets and HSBC Securities (Canada) Inc. acted as financial advisors and Torys LLP acted as legal advisor to Husky. Husky's board of directors appointed a committee of independent directors of the board to review and assess the transaction. The committee was advised by BMO Capital Markets as an independent financial advisor, who also provided a fairness opinion to the committee and the board. Osler, Hoskin & Harcourt LLP acted as legal advisor.
Mountaineer Concludes Open Season for NGL Storage
Mountaineer NGL Storage LLC has concluded a successful non-binding open season for its natural gas storage project near Clarington, Ohio. The open season resulted in requests for more than three times the amount of initial planned capacity.
The Mountaineer NGL Storage Project should break ground in early 2017 with a planned in-service date of early 2018.
The project plans to offer up to two million barrels of initial storage capacity with more than 40,000 bbls per day of load-in and load-out. The project will store ethane, propane, butane and y-grade products for a growing number of gas processors, producers, markets and commodity traders that are interested in exploiting the wet gas production from the Marcellus/Utica shales.
American Midstream makes Gulf of Mexico acquisitions
American Midstream Partners LP acquired interests in Gulf of Mexico midstream infrastructure and incremental ownership in Delta House for total consideration of approximately $225 million in April.
The partnership acquired interests in the Destin natural gas pipeline and the Tri-States and Wilprise natural gas liquids pipelines, all of which are FERC-regulated pipelines that collectively serve as a primary transport system for rich-gas production from the Eastern Gulf of Mexico. The Destin pipeline is supplied by Delta House and various other large Eastern Gulf of Mexico producing fields. The pipeline interests were acquired from an affiliate of the general partner of the partnership.
The partnership acquired a majority interest in crude, natural gas, and salt water onshore and offshore pipelines located in the Gulf of Mexico, including the Henry Gas Gathering System, from Chevron.
The partnership acquired from an affiliate of its general partner an additional 1% interest in Delta House, increasing the Partnership's total ownership in Delta House to approximately 14%.
The partnership also intends to acquire an interest in another offshore natural gas pipeline from an affiliate of its general partner during the second quarter 2016. This potential acquisition is fully funded under the current financing.
Total acquisition consideration of approximately $225 million equates to an anticipated multi-year Adjusted EBITDA multiple of approximately 6 times.
The partnership revised 2016 guidance with Adjusted EBITDA in a range of $125 million to $135 million and Distributable Cash Flow in a range of $85 million to $95 million, representing year-over-year growth of approximately 100%.
The partnership forecasts fee-based cash flow of greater than 90%, distribution coverage of greater than 1.5 times, and leverage of approximately 4.0 times in 2016.
The acquisitions were funded with preferred equity issued to an affiliate of ArcLight Capital Partners LLC, which controls the general partner of the partnership, and borrowings on the revolving credit facility.
Midstream CAPEX trends
In a markets research note May 25, Deutsche Bank offered an overview of midstream CAPEX trends, anticipating CY16 capex to fall -20% for its coverage this year from CY15 (roughly $20.3B vs. $25.4B)-a "reasonable proxy for the broader sector," analysts said. "We note that MLP capex cuts generally follows E&Ps, but the magnitude is much lower as projects announced in 2012-14 continue to move forward. Our new estimates adjust for a still-difficult funding market and expectations for further G&P cuts."
