Crestwood updates on project expansions and JV with First Reserve

Crestwood Equity Partners LP (NYSE: CEQP) has provided an update on its Delaware Permian Basin expansion projects, along with a strategic joint venture with First Reserve, a global private equity and infrastructure investment firm exclusively focused on energy.

Crestwood has begun a nonbinding open season to seek shipper support for the Delaware Takeaway crude pipeline system (Delta), a 164-mile crude and condensate pipeline header system originating at a new Crestwood terminal to be built near Orla, Texas, in Reeves County, with potential downstream connections to multiple downstream interconnects that will provide shippers access to end markets including El Paso, Midland, Houston and Corpus Christi, Texas, and Cushing, Oklahoma. As designed, Delta will have the capability to batch multiple grades of crude and condensate, and initially transport more than 200,000 barrels per day. The project may be further expanded based on the results of the open season. Delta is expected to be operational in the second quarter of 2017.

Crestwood is in negotiations with a producer in the Delaware Permian Basin to anchor a three-stream gathering system spanning portions of Reeves, Loving, and Culberson counties, Texas, that will aggregate crude and condensate volumes to Crestwood’s Orla Terminal. As currently designed, the three-stream gathering system would consist of 600 miles of pipelines and will span an area in excess of 400,000 acres. The Orla Terminal is planned to initially provide approximately 200,000 bbl of storage, truck loading and unloading facilities, blending services, and multiple upstream and downstream pipeline connections, and will potentially provide condensate stabilization services for Wolfcamp production.

The Delta pipeline system was designed specifically for producers seeking long-term optionality to access multiple downstream pipelines and markets, and it also has the operational capability to batch specific grades of crude oil and condensate.

The open season period begins Oct. 28 and will close on Dec. 7 at 4 PM CST.

In connection with Crestwood’s Delaware Permian Basin expansion opportunities, First Reserve and Crestwood are in exclusive negotiations to form a development joint venture dedicated to support growing producer demand for midstream infrastructure in the basin. Under the terms of the joint venture, First Reserve and Crestwood will initially commit equity capital of $500 million, which will be available to the joint venture for financing identified greenfield development and acquisition opportunities in an area of mutual interest spanning Reeves, Culberson and Loving counties, Texas.

Under the terms of the joint venture, which will be owned 50% by Crestwood and 50% by First Reserve, First Reserve will fund 100% of the initial capital requirements to the joint venture during the early-stage build-out of the systems, after which Crestwood will fund 100% of capital requirements for a period of time to achieve the 50/50 capital structure.

With First Reserve’s capital and strategic partnership, Crestwood is moving forward with expansion projects to support its producers’ development plans that are largely focused on the Wolfcamp formation.

The closing of the joint venture is subject to final execution of definitive documentation, customary and other closing conditions, including the approvals for Crestwood’s board of directors and Special Committee as well as First Reserve’s Investment Committee.


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