DCP Midstream acquires NGL Rockies pipeline system

DCP Midstream Partners, LP (DPM) acquired an interstate natural gas liquids (NGL) pipeline system from Buckeye Partners, L.P. (BPL) for $22 million in cash. The 350-mile pipeline originates in the Denver-Julesburg Basin in Colorado and terminates near the Conway hub in Bushton, Kansas. DCP Midstream, LLC, owner of the Partnership's general partner, currently utilizes the NGL pipeline as a market outlet for NGL production from certain of its plants in the DJ Basin. 

DCP Midstream, the largest gatherer and processor in the DJ Basin, is investing capital to accommodate growing demand from its producers for natural gas gathering and processing capacity, including a new natural gas processing plant at its Mewbourn facility and a new large diameter natural gas gathering pipeline. DCP Midstream anticipates completing its Mewbourn plant expansion by early 2011. 

"We believe the acquisition of the NGL pipeline by the Partnership will benefit our customers by maintaining a critical outlet for increased NGL production in the DJ Basin," said Tom O'Connor, chairman, president and CEO of DCP Midstream. 

The Partnership expects to spend approximately $18 million in expansion capital to connect and integrate the acquired pipeline with DCP Midstream's facilities, with cash flow contributions commencing in early 2011. In conjunction with the acquisition, DCP Midstream and the Partnership have agreed to a 10 year transportation agreement. 

"We are very pleased to have the opportunity to expand our NGL business with a project that is mutually beneficial to the Partnership, DCP Midstream, and its producer customers," said Mark Borer, president and CEO of the Partnership. "Given the pipeline's proximity to DCP Midstream's existing gathering and processing facilities, this acquisition and subsequent capital projects represent a strategic investment for the DCP enterprise. The investment is consistent with our strategies of optimizing our asset base and executing on growth opportunities around our footprint. The 100 percent fee-based earnings profile of this pipeline is an excellent fit within our asset portfolio."

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