The EnLink Midstream companies, EnLink Midstream Partners LP (NYSE: ENLK) (the Partnership) and EnLink Midstream LLC (NYSE: ENLC) (the General Partner) (together “EnLink”), have signed a definitive agreement to acquire Coronado Midstream Holdings LLC, which owns natural gas gathering and processing facilities in the Permian Basin, for $600 million.
Coronado operates three cryogenic gas processing plants and a gas gathering system in the North Midland Basin including 270 miles of gathering pipelines, 175 million cubic feet per day (MMcf/d) of processing capacity, and 35,000 horsepower of compression. Construction of an additional 100 MMcf/d of processing capacity and gathering system expansions of the Coronado system are under way. Coronado's key assets have been constructed within the past five years and the system has current inlet volumes of 100 MMcf/d. EnLink plans to connect the Coronado system with its Bearkat system to create a multi-county rich-gas gathering and processing system to create optimization opportunities for its customers and its product marketing services.
The owners of Coronado will receive $240 million in cash, $180 million of Partnership common units and $180 million of a new class of Partnership common units, subject to certain adjustments. The Partnership will be able to pay distributions on the new class of Partnership common units in cash or in additional common units of such new class, at the Partnership’s election. The new class of Partnership common units will be entitled to receive distributions equal to those paid on the Partnership common units currently outstanding. After five quarters of distributions have been paid following the closing of the transaction, or earlier at the Partnership’s election, the new class of common units will convert into the same class of common units that are currently outstanding.
The Coronado system is underpinned by long-term contracts, which include the dedication of production from over 190,000 acres. Coronado’s key producer customers include Reliance Energy Inc., Diamondback Energy Inc., and RSP Permian Inc. Reliance is the largest owner of Coronado, with affiliates of both Diamondback and RSP Permian owning the remainder of Coronado.