Crestwood Midstream Partners LP (NYSE: CMLP) and the owner of its general partner, Inergy LP (NYSE: NRGY) have announced that Crestwood's subsidiary, Crestwood Niobrara LLC has completed the acquisition of a 50% interest in Jackalope Gas Gathering Services LLC from RKI Exploration & Production LLC for a total cash consideration of $107.5 million.
The other 50% interest in Jackalope is owned by Access Midstream Partners LP, which will continue to provide field operations and construction management for Jackalope. Crestwood will assume the commercial development role for the joint venture.
GE Energy Financial Services provided $80.6 million of preferred equity to Crestwood Niobrara, with the remaining $26.9 million of the acquisition funded under Crestwood's revolving credit facility. GE Energy Financial Services has agreed to provide 75% of the future capital contributions for Crestwood Niobrara's 50% interest in Jackalope, up to an aggregate contribution of $150 million.
The Jackalope gathering and processing system is located in Converse County, Wyoming, in the emerging Powder River Basin Niobrara Shale play, and is currently composed of approximately 100 miles of gathering pipelines and 9,400 horsepower of compression equipment. The Jackalope System is being developed to gather and process rich natural gas produced from a 311,000-acre area of dedication from Chesapeake Energy Corp. and RKI, which have collectively accumulated the largest acreage block in the Powder River Basin Niobrara Shale play, spanning over 750,000 acres. The existing assets and future development are supported by a 20-year gathering and processing agreement with Chesapeake and RKI under which Jackalope receives cost-of-service based fees with annual redeterminations that provide for an attractive rate of return on invested capital.
Locke Lord LLP and Sidley Austin LLP acted as legal counsel to Crestwood Niobrara and GE Energy Financial Services, respectively, in connection with the acquisition and financing transactions.