Enterprise to purchase two natural gas gathering systems from M2 Midstream

Source: Enterprise Products Partners

Enterprise Products Partners L.P. (EPD) has executed definitive agreements to purchase two natural gas gathering and treating systems from subsidiaries of M2 Midstream LLC (Momentum) in a negotiated transaction for approximately $1.2 billion. These systems are located in Northwest Louisiana and East Texas and gather natural gas produced from the Haynesville/Bossier Shales and the Cotton Valley and Taylor Sands formations. 

The State Line system is located in Desoto and Caddo Parishes, Louisiana and Panola County, Texas. The system includes 138 miles of natural gas pipelines with a capacity of approximately 400 million cubic feet per day (MMcfd) and two treating facilities. The State Line system began operations in February 2009 and is currently gathering approximately 260 MMcfd. A 50-mile expansion of this system is expected to be completed in June 2010 and will increase its capacity to 700 MMcfd. The State Line system is supported by long-term acreage dedications and volumetric commitments from producers. 

The State Line system will interconnect with the 42-inch Haynesville Extension of Enterprise’s Acadian natural gas pipeline system. The Haynesville Extension is currently under construction and expected to be completed in the third quarter of 2011. Once connected to the Haynesville Extension, the State Line system can be further expanded to 1.2 billion cubic feet per day for a nominal cost. 

The Fairplay system is located in Rusk, Panola, Gregg and Nacogdoches counties, Texas. The system includes 249 miles of natural gas pipelines (including approximately 62 miles leased from third parties) with a capacity of approximately 285 MMcfd, and is currently gathering approximately 180 MMcfd. This system is expected to be connected to the Enterprise Texas Pipeline system by the first quarter of 2011. The Fairplay system is also supported by long-term acreage dedications and volumetric commitments from producers. 

“We are excited about this transaction with Momentum, which accelerates our entry into the Haynesville/Bossier Shale Play and substantially increases our footprint in the area,” said Enterprise president and chief executive officer Michael A. Creel. “This purchase offers producers on the State Line system an alternative to the takeaway pipelines going to Perryville as a result of our planned connection to the Haynesville Extension which provides producers with an outlet to markets in South Louisiana and interstate pipelines that serve natural gas markets in the Southeast United States.” 

“The State Line and Fairplay systems complement Enterprise’s downstream assets and provide multiple opportunities for synergies, including a long-term gathering conduit for our Haynesville Extension pipeline and Enterprise Texas Pipeline, as well as NGL volumes for our Panola Pipeline and downstream Mont Belvieu fractionation, storage and distribution complex. Natural gas volumes on the State Line system are expected to increase significantly over the next five years based on producer forecasts. With our low cost of capital, we expect this transaction to be accretive to distributable cash flow in the second half of 2010,” continued Creel. 

Completion of the transaction is subject to customary regulatory approvals, including those under the Hart-Scott-Rodino Antitrust Improvements Act, and other customary closing conditions. The transaction is expected to close in early May 2010.

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