Crestwood expands in Delaware basin, divests legacy Barnett shale assets

Crestwood Equity Partners LP entered into a series of agreements to acquire Delaware basin assets and divest Barnett shale assets, the company said in a May 25 release.

Delaware basin acquisitions

In one deal, the Houston-based company agreed to acquire Sendero Midstream Partners LP for $600 million in cash. The Eddy County, NM, assets include 350 MMcfd of processing capacity, some 140 miles of natural gas gathering lines, and over 53,000 hp of field gathering compression in the Permian Delaware basin.

The acquisition of adds over 75,000 dedicated acres with over 1,200 tier 1 drilling locations, long-term fixed fee contracts with commodity price upside, Crestwood said, also noting operational, capital, and commercial synergies as the assets are complementary to the existing Willow Lake footprint, “and can be integrated with minimal capital investment,” the company said.

The pro forma system will have total processing capacity of 550 MMcfd with about 100 MMcfd of unutilized space, reducing capital needed to expand the company’s existing 200-MMcfd Orla cryogenic gas processing plant in Reeves County, Tex., it continued. 

In another deal, Crestwood will acquire the remaining 50% equity interest in Crestwood Permian Basin Holdings LLC (CPJV) from First Reserve for $320 million. As part of the valuation and a condition to closing the transaction, First Reserve will fund $75 million into CPJV to pay down asset level debt and support a portion of the cash consideration due to Sendero Midstream, Crestwood said. In connection, Crestwood will issue to First Reserve about 11.3 million common units. Pro forma for the transaction, First Reserve will own about 10% of Crestwood’s common units outstanding. In addition, Crestwood will assume some $75 million in remaining debt outstanding at the joint venture level.

Barnett asset sale

Separately, in a deal slated to help fund the cash portion of the Sendero Midstream acquisition, Crestwood agreed to sell its legacy Barnett shale assets—acquired in October 2010—to EnLink Midstream LLC for $275 million in cash. The sale includes the Alliance System, the Lake Arlington System, and the Cowtown System, representing a full exit from the Barnett shale, Crestwood said.

With the deal, EnLink would expand its position in the Barnett with 500 miles of lean and rich gas gathering pipeline and three processing plants with 425 MMcfd of capacity, EnLink said in a separate release.

EnLink’s Barnett anchor position currently includes 1.08 bcfd operating natural gas processing capacity through two plants, 15 million b/d of fractionation capacity, and 4,200 miles of pipeline, according to an accompanying investor presentation.

The transactions are expected to close in third-quarter 2022, subject to customary regulatory approvals.