Summit Midstream Partners LP (NYSE: SMLP) reports that its wholly owned subsidiary, Grand River Gathering LLC, has agreed to acquire 100% of the equity interests in Red Rock Gathering Co. LLC from a subsidiary of Summit Midstream Partners LLC (Summit Investments) for total cash consideration of $305 million, subject to customary working capital adjustments.
The Red Rock drop-down transaction will be partially financed with a draw of approximately $110 million under SMLP's revolving credit facility. The balance of the acquisition is expected to be financed with the proceeds from a primary equity offering of SMLP common units. This drop-down transaction is expected to close before March 31.
Red Rock is a natural gas gathering and processing system located in the Piceance Basin in western Colorado and eastern Utah with approximately 1,480 miles of low-pressure and high-pressure pipeline, 54,000 horsepower of compression, and two processing plants with 50 MMcf/d of processing capacity. The Red Rock system gathers and processes natural gas, primarily under fee-based contracts, for more than 55 producer customers.
SMLP President and CEO Steve Newby commented that the transaction will be immediately accretive to distributable cash flow on a per-unit basis, and that it will further enhance SMLP's presence in western Colorado's Piceance Basin, which includes the Mesaverde formation, along with the Mancos and Niobrara shale formations.
“With the recent commissioning of Red Rock's new cryogenic processing plant for Black Hills Corp. and the ongoing development of natural gas gathering infrastructure for WPX Energy Inc., our largest customer on this system,” he said, “we believe that Red Rock will be a source of growth for SMLP for many years."