Pioneer Natural Resources Co. (NYSE: PXD) and Reliance Holding USA Inc. have closed the sale of their Eagle Ford shale midstream business (EFS Midstream) to an affiliate of Enterprise Products Partners LP for $2.15 billion. Pioneer owned 50.1% of EFS Midstream and Reliance owned the remaining 49.9%.
Pioneer and Reliance will also benefit from fee reductions under existing downstream processing and transportation contracts with Enterprise in exchange for extending the contracts’ terms to 20 years and dedicating additional Eagle Ford shale volumes to Enterprise. The reduced fees are expected to benefit Pioneer and Reliance over the original terms of the downstream contracts by approximately $200 million on a net present value basis at 10%. These reduced fees will primarily be reflected as improvements in future realized prices. Enterprise has also agreed to spend $270 million over the next 10 years on new facilities, connections, and expansions to support the continuing development of the Eagle Ford shale resource.
Upon closing this transaction, Pioneer will no longer receive its share of the cash flow generated by the EFS Midstream business, which was forecasted to be more than $100 million in 2015. The loss of this cash flow will result in an increase to Pioneer’s Eagle Ford shale production costs of approximately $3 per barrel oil equivalent (BOE) and total corporate production costs of approximately $0.75 per BOE.