Lucid II secures $350M equity commitment from EnCap Flatrock
Dallas, TX-based Lucid Energy Group II LLC has secured an initial equity commitment of $350 million from EnCap Flatrock Midstream and the Lucid II management team. Lucid II was formed by the team that leads its predecessor company, Lucid Energy Group LLC (Lucid I), also backed by EnCap Flatrock. Lucid II is pursuing organic development projects and strategic acquisitions in other producing basins. Locke Lord advised Lucid II, while Thompson & Knight advised EnCap Flatrock in this transaction.
WGL Announces $89M Investment in Stonewall Gathering System
WGL Midstream, a WGL Holdings Inc. company, has exercised an option for an $89 million equity investment in the Stonewall Gas Gathering System, representing a 35% ownership stake. The system initiated operations in November 2015 and is currently gathering one billion cubic feet (bcf) of natural gas daily from the Marcellus production region in West Virginia and delivering it to an interstate pipeline system to meet growing demand from markets in the mid-Atlantic region. The company expects the investment to be immediately accretive to earnings, adding between $5 and $6 million to pre-tax earnings in fiscal year 2016.
WGL Midstream secured an option to invest in the Stonewall system as part of an existing supply agreement with Antero Resources Corp., a natural gas operator in the Marcellus and Utica shale region and the current primary shipper in Stonewall. The agreement with Antero includes a firm sales agreement for 330,000 Dth/day to supply mid-Atlantic markets and WGL customers such as GAIL Global (USA) LNG LLC (GGULL), a subsidiary of GAIL (India) Ltd. WGL Midstream's ownership percentage would drop to 30% during fiscal year 2016 if other participants join the project as expected.
The Stonewall system has a capacity of up to 1.4 bcf of gas daily. The 67-mile system collects gas from West Virginia counties and connects with Columbia Gas Transmission.
Other Stonewall investors include M3 Midstream LLC and Vega Energy Partners. M3 Midstream serves as majority owner and operates Stonewall Gas Gathering LLC.
ONEOK completes first phase of Roadrunner pipeline project
ONEOK Partners LP has completed the first phase of the Roadrunner Gas Transmission pipeline project in West Texas.
Roadrunner is a 200-mile pipeline connecting ONEOK Partners' existing WesTex natural gas pipeline system near Coyanosa, Texas, to a new international border-crossing connection at the US and Mexico border near San Elizario, Texas. The project is fully subscribed under 25-year firm fee-based commitments. The completed first phase provides 170 MMcf/d of capacity to markets in Mexico and El Paso, Texas. The second phase, which will increase the pipeline's capacity to 570 MMcf/d, is currently under construction and is expected to be completed in the first quarter of 2017. The third and final phase of the project is expected to be completed in 2019 and will increase the total capacity on the pipeline to 640 MMcf/d. The project is a 50-50 joint venture with Mexico City-based natural gas infrastructure company Fermaca and is estimated to cost $430-480 million, a decrease of $20 million from previously announced cost estimates.
Paradigm to construct Bakken gathering system
Paradigm Energy Partners LLC's wholly owned subsidiary, Paradigm Midstream Services - ND LLC, has finalized an agreement with an undisclosed private company to construct a new gathering system to gather crude oil in North Dakota's Bakken shale play. Under the terms of the agreement, which is secured through an acreage dedication, the 23-mile gathering system will deliver approximately 17,000 acres of production from the Ross Field in northern Mountrail County to Paradigm's joint venture rail terminal in Palermo, North Dakota. Paradigm is focusing on opportunities in Mountrail, McKenzie, and Dunn counties in North Dakota to enhance the value of its existing joint venture rail terminal, as well as the 91-mile Sacagawea Pipeline, which connects markets in Stanley, Ross, and Palermo, North Dakota, with markets in Johnson's Corner near Paradigm's storage terminal in Keene, North Dakota. The Sacagawea Pipeline and Keene Terminal are expected to be in service by the end of the third quarter of 2016.
Summit Midstream closes asset drop-down
On March 3, Summit Midstream Partners LP closed the drop-down acquisition of all the issued and outstanding membership interests of Summit Utica, Meadowlark Midstream, and Tioga Midstream, each limited liability companies and indirect wholly owned subsidiaries of Summit Midstream Partners Holdings LLC (SMP Holdings), and SMP Holdings' 40% joint venture interest in each of Ohio Gathering and Ohio Condensate.
In conjunction with the close, SMLP made an initial $360 million cash payment to SMP Holdings. This initial payment was funded with proceeds from SMLP's upsized revolving credit facility, which, by an amendment executed in February, has an increased borrowing capacity of $1.25 billion effected by the closing of the 2016 drop down.
A final payment will be made to SMP Holdings in 2020. This deferred payment will be equal to 6.5 multiplied by the average adjusted EBITDA of the drop-down assets for 2018 and 2019; less the initial payment; less all capital expenditures incurred for the drop-down assets between the initial close and Dec. 31, 2019; plus all adjusted EBITDA from the drop-down assets between the initial close and Dec. 31, 2019.
Tailwater Capital forms TopSail Energy
Tailwater Capital LLC, an energy-focused private equity firm, has made in initial equity commitment of $100 million to The Woodlands, TX-based TopSail Energy LP, a newly formed portfolio company that will primarily focus on purchasing and developing various refined products logistics and processing assets in North America. Jim Lelio will serve as CEO. Lelio spent the past 15 years in senior roles at Kinder Morgan, and has over 21 years of midstream and downstream oil and gas experience. Derrick Bockius will serve as COO. Over the past 10 years, Bockius has overseen construction and operations of several large midstream projects, including Kinder Morgan's transmix facility in St. Louis, Missouri; Kinder Morgan's condensate splitter facility in Galena Park, Texas; and Magellan Midstream's condensate splitter facility in Corpus Christi, Texas.
BOOK REVIEW: THE DOMINO EFFECT
Mapping the energy highway
Many people in the energy business call themselves experts, but E. Russell "Rusty" Braziel has earned that descriptive. He is one of the most respected authorities in the field of energy information and markets with broad experience that includes a background in trading and analytics in the natural gas, NGL, and crude oil markets.
Rusty is president and CEO of RBN Energy, an energy consultancy that provides analysis and advisory services. Earlier in his career, he served as vice president of natural gas marketing and trading and manager of NGL supply for Texaco and later was VP of business development for The Williams Companies. During the energy trading boom in the 1990s, he headed a software company, Altra Energy Technologies, which he sold to New York-based Caminus Corp. in 2001.
More recently, Rusty was a co-owner of Bentek Energy, a research and analytics firm with offices in Colorado. He left Bentek when the company was sold to Platt's and subsequently founded RBN Energy. He is a sought-after speaker at energy events.
Full disclosure: Rusty also sits on the Editorial Advisory Board for Oil & Gas Financial Journal.
The Domino Effect is a new book from Braziel that describes the impact of the Shale Revolution on the United States. The "Domino Effect," according to the author, is a cascading series of events that have profoundly transformed energy markets, reshaped major energy-related industries, and remodeled the global economic and geopolitical landscape. Braziel describes in clear English the shift in global supply and demand that is driving and will continue to drive energy markets for decades to come.
In our view, The Domino Effect provides insightful analysis that is a must-read for energy producers, marketers, end-users, capital providers, investors, and anyone who wants to obtain a better understanding of energy markets and how unconventional has become the new conventional.
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-Don Stowers
