Water Midstream Partners LLC has completed
the southern extension
to its Midland County
commercial pipeline system, connecting new oil
and gas wells inside and
adjacent to the city of
Midland to its Saltwater
Disposal Well (SWD) on
SH 158. This extension
brings the total miles
of this pipeline system
to 9. 5 miles, adding to
the more than 45 miles
pipelines that connect to
Water Midstream’s Midland County SWD. The
extension will create direct pipeline connections
for salt water disposal for
more than 100 existing
and planned wells,
reducing operator costs
for saltwater transportation and disposal, and
eliminating as many as
300 daily trips by water
hauling trucks on county
and state roads.
KINDER MORGAN STRIKES DEALS WITH
RIVERSTONE, SOUTHERN COMPANY
In separate deals, Kinder Morgan Inc. has partnered with Riverstone Investment Group LLC and
Agreeing to an upfront cash payment at closing, Riverstone Investment Group LLC will become a 50% partner in the Utopia Pipeline Project.
The payment consists of reimbursement to KMI
for its 50% share of prior capital expenditures
related to the project and a payment in excess
of capital expenditures.
In addition to the acquisition of the existing
assets, Riverstone has agreed to fund its share of
future capital expenditures necessary to complete
construction and commissioning of the pipeline
project. The total project cost is estimated to be
approximately $500 million (excluding capitalized
The pipeline will connect with an existing Kinder Morgan pipeline and associated facilities in
order to transport ethane and ethane-propane
mixtures to petrochemical companies operating
in Ontario, Canada. The project is supported by
a long-term contract with Nova Chemicals Corp.
Credit Suisse acted as the exclusive financial
advisor to KMI for the transaction.
In an investor note following the announce-
ment, Deutsche Bank analysts recalled KMI’s goals
stated during the company’s January 2016 Analyst
Day: “high-grade the backlog, reduce capex,
execute on the growth plan, and preserve current
cash flow – this deal hits all four marks.”
In a separate deal, Kinder Morgan has entered
a natural gas pipeline venture with Southern Com-
pany, selling a 50% equity interest in the Southern
Natural Gas (SNG) pipeline system to Southern
Company. Kinder Morgan will continue to operate
the system. The agreement commits the compa-
nies to cooperatively pursue specific growth op-
portunities to develop natural gas infrastructure
for the strategic venture.
SNG is a 7,600-mile pipeline system connecting
natural gas supply basins in Texas, Louisiana,
Mississippi, Alabama and the Gulf of Mexico to
markets in Louisiana, Mississippi, Alabama, Florida, Georgia, South Carolina and Tennessee. SNG
is a principal transporter of natural gas to Alabama, Georgia and South Carolina.
Inclusive of existing SNG debt, the transaction
equates to an SNG total enterprise value of approximately $4.15 billion which implies a value of
$1.47 billion for Southern Company’s 50% share
of the equity interest.
Jones Day, Gibson Dunn & Crutcher LLP, Troutman Sanders LLP and Balch & Bingham LLP are
serving as legal counsel to Southern Company,
and Bracewell LLP and Weil, Gotshal & Manges
LLP are serving as legal counsel to Kinder
Deutsche Bank analysts said the deal “values
the asset at $4.15b (EV) and implies a 10.4x mul-
tiple on SNG’s ~$400m in current run-rate EBITDA
The deal is “a departure from the current strat-
egy of selling development assets with large
capex obligations (seen two weeks ago with Uto-
pia), but is a result of SNG’s largest customer (SO)
approaching with an offer 1 yr ago,” the analysts
continued in an investor note following the an-
nouncement. Calling the deal a “great transac-
tion,” Deutsche Bank said proceeds from the deal
and the deconsolidation of SNG’s $1.2 billion in
debt “will lead to a roughly $2.7 billion overall
decrease in balance sheet debt.”
Moody’s affirmed their Baa3/Stable rating post
KMI’s announced sale of 50% of SNG.
DEVON SELLS ACCESS PIPELINE
TO WOLF MIDSTREAM FOR US$1.1B
Devon Energy Corp. has entered into a definitive
agreement to sell its 50% ownership interest in
Access Pipeline to Wolf Midstream Inc., a portfolio
company of Canada Pension Plan Investment
Board, for CAD $1.4 billion, or USD $1.1 billion.
The agreement also includes the potential for an
incremental CAD $150 million (US$120 million)
payment with the sanctioning and development
of a new thermal-oil project on Devon’s Pike lease
in Alberta, Canada.
Under terms of the agreement, Devon’s thermal-oil acreage is dedicated to Access Pipeline
for an initial term of 25 years. A market-based toll
will be applied to production from the company’s
three Jackfish projects. As a result, Devon expects
its lease operating expense at the Jackfish complex to increase by approximately US $100 million
on an annualized basis.
The agreement also includes the potential for
the Access Pipeline toll to be reduced by as much
as 30% with the development of new thermal-oil
projects in the future. The company’s next potential project is the first phase of Pike, which is
located immediately adjacent to the Jackfish
complex. Devon is the operator of this joint venture leasehold with a 50% working interest.
Capital One Securities analyst Phillips Johnston
said the sale is modestly positive for three reasons.