EnLink Midstream forms JV with NGP to expand gathering and processing in the Delaware Basin

A subsidiary of EnLink Midstream Partners LP (NYSE: ENLK) (the partnership), and EnLink Midstream LLC (NYSE: ENLC) (the general partner) and an affiliate of NGP Natural Resources XI LP have formed a strategic joint venture to operate and expand the partnership’s natural gas, natural gas liquids, and crude oil midstream assets in the Delaware Basin.

The new expansion, named Lobo II, will include the installation of a cryogenic natural gas processing facility with capacity up to 120 million cubic feet per day and associated natural gas and liquids gathering pipeline infrastructure in Loving County, Texas, and Eddy and Lea counties, New Mexico. The partnership will serve as the joint venture’s managing member and will handle day-to-day construction and operation of the assets, which are supported by long-term, fee-based commitments from major producers.

The expansion builds off the partnership’s existing Lobo System, a gathering and processing system acquired from Matador Resources in October 2015, which the partnership contributed to the newly formed joint venture. Upon completion of Lobo II, the facility will have a total processing capacity of approximately 155 MMcf/d in the Delaware Basin.

The joint venture is initially owned 50.1% by the partnership and 49.9% by NGP. The partnership contributed approximately $230 million of existing Delaware Basin assets to the joint venture and committed an additional approximately $285 million in capital to fund potential future development projects and potential acquisitions. NGP committed an aggregate of approximately $400 million of capital, including an initial contribution of approximately $115 million, which the joint venture distributed to the partnership at the formation of the joint venture to reimburse the partnership for capital spent to date on existing assets and ongoing projects. As part of this agreement, NGP granted the partnership graded call rights beginning in 2021 to acquire increasing portions of NGP’s interest in the joint venture at a price based upon a predetermined valuation methodology. The joint venture is governed by a board of directors initially comprised of two designees of each partner, with the partnership serving as the joint venture’s managing member that will handle day-to-day construction and operation of the assets.

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