A Permian Basin-focused oil and gas company was expected to be sold to a Houston company in a $600 million deal intended to take advantage of growth in the region during a time of high energy prices.
Crestwood Equity Partners announced its planned purchase of Sendero Midstream May 25 in an effort to increase Crestwood’s presence in the western Delaware sub-basin of the Permian in southeast New Mexico.
The company planned to help finance its deal by selling $275 million in assets in the Barnett Shale centered near Dallas and Fort Worth, Texas.
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Sendero’s assets being sold are all in Eddy County, and benefit from low break-even costs and high production, per a news release.
The deal included 75,000 acres and 1,200 drilling locations.
Crestwood’s system following the deal will have a total gas processing capacity of 550 million cubic feet per day.
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Crestwood Chief Executive Officer Robert Phillips said the acquisition will compliment his company’s assets already held in the region.
“I am thrilled to announce this series of strategic transactions that greatly enhance the Crestwood franchise by creating immediate scale and additional runway in the Delaware Basin, high-grading our cash flow mix through the rationalization of non-core assets, and successfully maintaining our conservative balance sheet and financial flexibility,” he said.
“The acquisition of Sendero Midstream is highly complementary to our existing Willow Lake assets, provides excess processing and compression capacity for current and future customer development activity, and solidifies Crestwood’s footprint in the leading North American shale play.”
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He said after the company divests in the Barnett Shale, Crestwood’s operations will focus on the Delaware Basin, along with the Williston Basin in North Dakota and Powder River Basin in Montana and Wyoming.
The move was part of a larger effort, Phillips said, to drive up returns for Crestwood’s shareholders and would be followed by addition acquisitions in the company’s core areas.
“We believe the strategic actions we are taking today to divest a legacy asset to core up our position in one of the most prolific, economic, and active basins in North America, best positions Crestwood to deliver long-term value creation for our unitholders,” Phillips said.
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As fossil fuel-producing land continued to change hands in the Permian Basin, more pipelines were developed or expanded to bring oil and natural gas to export and refinery markets along the Gulf Coast in southeast Texas.
The latest announcement saw WhiteWater, EnLink Midstream, Devon Energy and MPLX receive the final investment agreement needed to build a 490-mile pipeline across Texas to connect the Permian with the Gulf, and plan to complete the line by third quarter 2024.
The Matterhorn Express Pipeline will have a transportation capacity of 2.5 billion cubic feet per day of natural gas through a 42-inch pipeline starting in Waha, Texas, a gathering hub that supports Permian Basin producers in Texas and New Mexico.
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The line will end at Katy, Texas near Houston and will have multiple connections to systems throughout the Permian including processing facilities in the Permian’s eastern Midland sub-basin through a 75-mile lateral connection.
The Matterhorn Pipeline will also have a direct connection to the Agua Blanca Pipeline which delivers gas from the Delaware Basin to the Waha Hub with a capacity of 3.2 billion cubic feet per day.
CEO of WhiteWater Christer Rundlof said the line will meet growing needs in the Permian and reduce the amount of gas that has to be removed from the system through flaring, a process of burning off excess gas.
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Flaring became controversial in recent years as it drew concerns over its environmental and pollution impacts.
“Matterhorn will provide premium market access with superior flexibility for Permian Basin shippers while playing a critical role in minimizing flared volumes,” Rundloff said. “WhiteWater is excited to partner with EnLink, Devon, and MPLX to develop incremental gas transportation out of the Permian Basin as production continues to grow in West Texas.
Growth in oil and gas operations was reported in the Permian Basin and both states that share it in recent weeks, although it slowed slightly in the last week.
New Mexico held steady at 98 oil and gas rigs as of Friday, per the latest data from Baker Hughes, while Texas added on rig for a total of 358.
The states increased by 27 rigs and 140 rigs in the last year, respectively, records show, while the Permian Basin was down one rig in the last week for a total of 342 – an increase of 109 rigs in the last year.
Adrian Hedden can be reached at 575-628-5516, [email protected] or @AdrianHedden on Twitter.