Thursday, August 16, 2018
Two midstream transactions by Williams Partners LP (Tulsa) will result in the company’s entry into Colorado’s Denver-Julesburg (DJ) Basin and the exit of operations from the Four Corners Area in New Mexico and Colorado. Williams and the global investment firm KKR & Co. (New York, N.Y.) have entered into an agreement to purchase Discovery DJ Services from TPG Growth, the middle-market and growth equity platform of the alternative asset firm TPG (San Francisco), for $1.173 billion.
Discovery DJ Services is a Dallas-based provider of natural gas- and oil-gathering and natural gas processing services in the southern area of the Denver-Julesburg Basin. Upon closing, Williams and KKR will own the entirety of Discovery’s midstream business through a joint venture. Williams’ initial contribution and ownership will be 40% of the purchase price, while KKR will contribute and own 60%.
Discovery, whose management team is partnering with Williams and KKR, provides midstream services to producers drilling the prolific Niobrara and Codell stacked-pay zones of the basin. Discovery’s infrastructure and related facilities are strategically located in Colorado’s Weld and Adams counties. The Discovery system includes both natural gas and crude oil gathering pipelines, cryogenic gas processing, liquids handling, and crude oil storage.
The assets include 60 MMcfd of gas processing capacity with an additional 200 MMcfd plant that is fully permitted and under construction. It is expected to be in service by the end of this year. The Discovery assets also include 130 miles of natural gas pipeline and about 260,000 acres dedicated for gas gathering and processing, plus an additional 60,000 acres for oil gathering.
“Adding the fast-growing Discovery midstream business, including sites with permitting under way for greater than 1 Bcfd of gas processing to our portfolio, follows our strategy of connecting the best supplies to the best markets,” said Alan Armstrong, president and CEO of Williams. “This is a great opportunity to expand our asset footprint into a premium-growth basin and brings the benefits of the Williams capability suite to better serve producers in the DJ Basin. This acquisition of Discovery is expected to unlock valuable synergies with our current operations and drive increased earnings.”
He added that the transaction allows Williams to take advantage of synergies between the Discovery assets and its downstream businesses via the DJ Lateral of the Overland Pass Pipeline (OPPL). “We will now have the opportunity to integrate output from these acquired assets with production from our existing processing footprint in the west segment into our advantaged downstream assets, including OPPL and the Conway fractionator and storage facilities.”
Under the terms of the agreement, Williams will be the operator of Discovery and will hold a majority of governance voting rights. Williams has committed to fund additional capital as required to bring its ownership to 50/50. In addition, Williams has the option of acquiring a portion of KKR interests at determined and agreed-to terms until the sixth anniversary of the deal’s closing.
Concurrent with the Discovery transaction, Williams is selling assets and equity in its Four Corners Area (FCA) business in New Mexico and Colorado to Harvest Midstream Co. (Houston) for $1.125 billion in cash. Proceeds from the deal will contribute to funding Williams’ portfolio of growth capital and investment expenditures, including opportunities afforded by the Discovery transaction.
The assets being divested are in San Juan and Rio Arriba counties in New Mexico and in La Plata County in Colorado. They include 3700 miles of pipeline, two gas processing plants, and one CO2 treating facility. The transaction is expected to close in the second half of this year following the conclusion of the Discovery deal.
“The FCA transaction is a win-win opportunity for both Williams and Harvest,” said Michael Dunn, COO of Williams. “The sale of the FCA assets supports Williams’ expansion of operations into the DJ Basin and funding of future growth capital. At the same time, we are pleased that an outstanding midstream services provider like Harvest will be the operator of these assets and know that the employees who move from Williams to Harvest will continue delivering gas gathering and processing expertise that is second to none in that basin.”
“The Four Corners Area has been an important part of Williams dating back to the acquisition of Northwest Energy in 1983,” added Armstrong. “However, pressure on natural gas pricing from adjacent basins, like the Permian, demand a new basin model that consolidates and integrates upstream production with midstream operations in a way that optimizes throughput and lowers cost. We believe that Harvest is ideally positioned to achieve this integration, and Williams can redeploy the proceeds into improved opportunities for growth.”
(SOURCE: The Weekly Propane Newsletter, August 13, 2018. For subscription information click the Subscription tab at BPNews.com)
Discovery DJ Services is a Dallas-based provider of natural gas- and oil-gathering and natural gas processing services in the southern area of the Denver-Julesburg Basin. Upon closing, Williams and KKR will own the entirety of Discovery’s midstream business through a joint venture. Williams’ initial contribution and ownership will be 40% of the purchase price, while KKR will contribute and own 60%.
Discovery, whose management team is partnering with Williams and KKR, provides midstream services to producers drilling the prolific Niobrara and Codell stacked-pay zones of the basin. Discovery’s infrastructure and related facilities are strategically located in Colorado’s Weld and Adams counties. The Discovery system includes both natural gas and crude oil gathering pipelines, cryogenic gas processing, liquids handling, and crude oil storage.
The assets include 60 MMcfd of gas processing capacity with an additional 200 MMcfd plant that is fully permitted and under construction. It is expected to be in service by the end of this year. The Discovery assets also include 130 miles of natural gas pipeline and about 260,000 acres dedicated for gas gathering and processing, plus an additional 60,000 acres for oil gathering.
“Adding the fast-growing Discovery midstream business, including sites with permitting under way for greater than 1 Bcfd of gas processing to our portfolio, follows our strategy of connecting the best supplies to the best markets,” said Alan Armstrong, president and CEO of Williams. “This is a great opportunity to expand our asset footprint into a premium-growth basin and brings the benefits of the Williams capability suite to better serve producers in the DJ Basin. This acquisition of Discovery is expected to unlock valuable synergies with our current operations and drive increased earnings.”
He added that the transaction allows Williams to take advantage of synergies between the Discovery assets and its downstream businesses via the DJ Lateral of the Overland Pass Pipeline (OPPL). “We will now have the opportunity to integrate output from these acquired assets with production from our existing processing footprint in the west segment into our advantaged downstream assets, including OPPL and the Conway fractionator and storage facilities.”
Under the terms of the agreement, Williams will be the operator of Discovery and will hold a majority of governance voting rights. Williams has committed to fund additional capital as required to bring its ownership to 50/50. In addition, Williams has the option of acquiring a portion of KKR interests at determined and agreed-to terms until the sixth anniversary of the deal’s closing.
Concurrent with the Discovery transaction, Williams is selling assets and equity in its Four Corners Area (FCA) business in New Mexico and Colorado to Harvest Midstream Co. (Houston) for $1.125 billion in cash. Proceeds from the deal will contribute to funding Williams’ portfolio of growth capital and investment expenditures, including opportunities afforded by the Discovery transaction.
The assets being divested are in San Juan and Rio Arriba counties in New Mexico and in La Plata County in Colorado. They include 3700 miles of pipeline, two gas processing plants, and one CO2 treating facility. The transaction is expected to close in the second half of this year following the conclusion of the Discovery deal.
“The FCA transaction is a win-win opportunity for both Williams and Harvest,” said Michael Dunn, COO of Williams. “The sale of the FCA assets supports Williams’ expansion of operations into the DJ Basin and funding of future growth capital. At the same time, we are pleased that an outstanding midstream services provider like Harvest will be the operator of these assets and know that the employees who move from Williams to Harvest will continue delivering gas gathering and processing expertise that is second to none in that basin.”
“The Four Corners Area has been an important part of Williams dating back to the acquisition of Northwest Energy in 1983,” added Armstrong. “However, pressure on natural gas pricing from adjacent basins, like the Permian, demand a new basin model that consolidates and integrates upstream production with midstream operations in a way that optimizes throughput and lowers cost. We believe that Harvest is ideally positioned to achieve this integration, and Williams can redeploy the proceeds into improved opportunities for growth.”
(SOURCE: The Weekly Propane Newsletter, August 13, 2018. For subscription information click the Subscription tab at BPNews.com)
