EnLink Midstream to purchase Tall Oak Midstream for $1.55 billion

A subsidiary of EnLink Midstream Partners LP and EnLink Midstream LLC has agreed to acquire subsidiaries of Tall Oak Midstream LLC for $1.55 billion.

About 84% of the combined acquisition will be acquired by the partnership and the remainder will be acquired by the general partner.

Tall Oak’s assets lie in the core areas of the STACK and CNOW plays. The assets include two gathering and processing systems and will include a rich gas pipeline currently under construction that will connect the two systems.

The Chisholm plant, which serves the STACK play, is a 100-MMcfd capacity cryogenic gas processing plant. The facility is currently being expanded by an additional 200 MMcfd, which is expected to be completed in third-quarter 2016.

Depending on future volume requirements, EnLink says the Chisholm plant could be expanded by another 400 MMcfd for a total processing capacity of 700 MMcfd. The plant is connected to a 200-mile, low- and high-pressure gathering system with compression facilities. Additional gathering pipelines and compression facilities are currently under construction.

The Battle Ridge plant, which provides EnLink with an entrance into the CNOW play, is a 75-MMcfd capacity cryogenic gas processing plant. The plant is connected to a 175-mile, low- and high-pressure gathering system with compression facilities. Additional gathering pipelines and compression facilities are currently under construction.

A 42-mile, 16-in. high-pressure header pipeline with a total capacity of 150 MMcfd is under construction to connect Tall Oak’s Chisolm plant and Battle Ridge systems. It’s expected to be in service by yearend.

Devon-Felix synergies

Separately, Devon Energy Corp. also reported on Dec. 7 that it agreed to acquire Felix Energy LLC for $1.9 billion (OGJ Online, Dec. 7, 2015). The Felix acreage is dedicated to the Tall Oak system, making it the largest customer of the system.

EnLink says its agreement to acquire the Tall Oak systems and Devon’s agreement to acquire Felix Energy highlights the strong sponsorship and strategic alignment of EnLink and Devon on growth opportunities in the STACK play.

Felix’s position in the region includes 210,000 net effective acres primarily in Blaine, Canadian, and Kingfisher counties immediately north and northeast of Devon’s legacy Cana-Woodford position.

Producers, including Devon, expect to place multiple horizontal wellbores in each section to fully develop both formations. Economics in the STACK play are among the most favorable of all producing regions in the US with low breakeven commodity prices for producers, EnLink says.

The CNOW is an emerging play that includes two shallow stacked producing formations leading to low-cost wells reported at less than $2 million/well. The combined Tall Oak and EnLink assets effectively link the STACK, Cana Woodford, and CNOW plays.

EnLink says it has the opportunity to build out the Tall Oak systems by connecting its existing Cana assets to the Tall Oak assets, which would create a “super-system” in the heart of the STACK play. Longer term plans include the potential for connecting EnLink’s Oklahoma assets to EnLink’s North Texas assets through a multi-phase pipeline development called the Oklahoma Express project.

Tall Oak also holds crude oil dedications from major customers on its gas gathering and processing system including Felix. EnLink says it expects to work closely with Devon and other STACK customers to develop a mutually-beneficial crude oil gathering system.

The deal, expected to be completed in the first quarter of 2016, is subject to the satisfaction of customary closing conditions, including applicable regulatory approvals, as well as the completion of Devon’s acquisition of Felix, which is expected to occur concurrently with the Tall Oak closing.

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