DCP Midstream LLC, the Denver-based 50-50 joint venture of Phillips 66 and Spectra Energy Corp., and DCP Midstream Partners LP (DMP) have signed a definitive merger agreement under which the companies will combine their businesses to form a new entity that, by late January, will be the largest NGL producer and gas processor in the US.
On Jan. 23, the combined company will be renamed DCP Midstream LP and have an enterprise value of $11 billion, the companies said.
As part of the Jan. 4 transaction, DMP acquired nearly all DCP Midstream assets, including a cash payment of $424 million as well as $3.15 billion of assumed debt, in exchange for about $1.125 billion worth of units in DMP.
Phillips 66 and Spectra Energy will retain their 50-50 joint ownership of DCP Midstream, which owns the incentive distribution rights and 38% of outstanding DMP general and limited-partner units.
The merger aligns with the companies’ goals of simplifying the corporate structure to combine operations into a diversified portfolio of assets that, unified, offers a platform for strong growth opportunities in key US-producing basins, said Wouter van Kempen, chairman, president, and chief executive of both DCP Midstream and DMP.
DMP also announced plans to advance several expansion projects, including construction of two 200-MMcfd cryogenic natural gas processing plants in the DJ basin, van Kempen said.
The first plant, Mewbourn 3, is scheduled for startup by yearend 2018 and will be the company’s tenth plant in the DJ basin.
A cooperative development plan with several key producers in the region to bring the second plant into service by mid-2019 also is in place.
Once completed, the plants will have connections to the Front Range pipeline for NGL takeaway to Mont Belvieu, Tex., and will double the company’s overall processing capacity in the basin to 1.2 bcfd.
DMP’s other projects in the region include completing the next phase of its Grand Parkway low-pressure gathering project and associated compression expansions by yearend 2018, including construction of additional field compression and plant bypass infrastructure that will add about 40 MMcfd of incremental capacity during summer 2017.
DMP said it expects to invest as much as $395 million to complete its DJ basin plant and associated gathering projects.
In the Delaware basin, the company confirmed it will expand takeaway capacity on its Sand Hills NGL pipeline by 85,000 b/d to the line’s full 356,000-b/d capacity.
The newly combined entity, which owns two-thirds interest in Sand Hills, plans to invest $70 million to complete the project, with fellow Sand Hills owner Phillips 66 Partners LP to fund the proportionate share of its one-third interest.
The Sand Hills expansion, which involves adding four pump stations and a pipeline loop, is scheduled to be operational in fourth-quarter 2017.
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