Plains All American to acquire Permian’s Alpha Crude Connector for $1.2 billion

Plains All American Pipeline LP has agreed to acquire 100% of the equity interests in Alpha Holding Co. LLC, which indirectly owns the Alpha Crude Connector (ACC) gathering system in the northern Delaware basin, for $1.215 billion. ACC is owned by Concho Resources Inc. and Frontier Midstream Solutions LLC.

The ACC gathering system is a newly constructed system in Lea and Eddy counties, NM, that also extends into Loving, Winkler, and Culberson counties, Tex. The system is supported by acreage dedications covering 315,000 gross acres, the majority of which have 10-year terms, and include a “significant” acreage dedication from Concho, PAA says. In addition, a large area of mutual interest agreement with Concho spans the area immediately around the gathering system.

The ACC system is comprised of 515 miles of gathering and transmission lines and five market interconnects, including PAA's Basin pipeline system. Following closing, PAA intends to make three additional interconnects to PAA's existing northern Delaware basin system as well as additional enhancements intended to increase the system capacity to 350,000 b/d, depending on the level of volume at each delivery point.

The ACC system was placed in initial service in late 2015 with multiple new well connections made throughout 2016. Fourth-quarter 2016 gathering volumes averaged 70,000 b/d and shipper nominations for January totaled 85,000 b/d.

Growing Permian footprint

Greg Armstrong, PAA chairman and chief executive officer, said the deal complements the firm’s existing assets that provide transportation and related services throughout the Permian. "The northern Delaware basin is an area that is experiencing increased activity levels and significant industry investment,” he said. “We expect aggregate crude oil production on the dedicated acreage to double over the next 2 to 3 years, and we believe that overall Permian basin crude oil volumes have the potential to grow as much as 50% or more during this same time period."

PAA this month said it’s expanding the capacity on its Cactus pipeline from McCamey to Gardendale in Texas to 390,000 b/d, which is anticipated to be completed in the third quarter and will allow PAA to move increasing production volumes from the Permian to Corpus Christi and other delivery points along the system (OGJ Online, Jan. 18, 2017).

Also, BridgeTex Pipeline Company LLC, in which PAA owns 50% interest, said it’s expanding the capacity on the BridgeTex pipeline from Colorado City to Houston in Texas to 400,000 b/d, which is anticipated to be completed in the second quarter and will also move increasing production volumes from the Permian to the Houston Gulf Coast area (OGJ Online, Jan. 26, 2017).

Asset sales elsewhere

PAA also has agreed to sell its Bluewater gas storage facility in Michigan and a noncore pipeline segment in the Midwest for $310 million, and has completed the sale of an undivided 40% interest in a segment of the Red River pipeline to a subsidiary of Valero Energy Partners LP for $70 million.

The undivided interest conveyed represents 60,000 b/d on the segment of the pipeline, known as the Hewitt segment, extending from Cushing to Hewitt in Oklahoma, near Valero's refinery in Ardmore, Okla.

PAA retained an undivided 60% interest in the Hewitt segment and 100% interest in the remaining portion of the pipeline that extends from Ardmore to Longview, Tex., where it connects with various pipelines, including PAA's newly constructed Caddo pipeline that extends to refinery markets in North Louisiana.