Kinder Morgan to purchase 50% of Petrohawk's Haynesville Shale midstream ops for $875MM

Source: Kinder Morgan

Kinder Morgan Energy Partners, L.P. (KMP) has entered into a definitive agreement to purchase a 50 percent interest in Petrohawk Energy Corporation’s (HK) natural gas gathering and treating business in the Haynesville Shale for $875 million in cash.

The transaction will create the largest gathering and midstream business in the Haynesville Shale of northwest Louisiana. The assets consist of more than 170 miles of pipeline currently in service, which is expected to increase to about 375 miles of pipeline with projected throughput of over 800 million cubic feet per day by year-end 2010. Additionally, the system’s amine treating plants have a projected capacity of approximately 2,635 gallons per minute by year end. 

“We are delighted to gain entry into one of the largest onshore natural gas fields in the United States by partnering with Petrohawk, a strong E&P operator with superb fee-based gathering and treating assets in the Haynesville Shale,” said Kinder Morgan Chairman and CEO Richard D. Kinder. “We anticipate this joint venture will generate substantial future growth opportunities as additional development continues in the Haynesville Shale both from Petrohawk and third-party producers.” 

Petrohawk will continue to operate the business during a short transition period, after which a new company, KinderHawk Field Services LLC, owned 50/50 by Petrohawk and Kinder Morgan, will assume operations. The joint venture has received a life of lease dedication to transport and treat all of Petrohawk’s operated Haynesville and Bossier Shale production in Louisiana at agreed upon rates, as well as minimum volume commitments from Petrohawk for the first five years. The new company, which will be staffed with experienced personnel from both companies, will also focus on providing firm service to third-party shippers. The venture ultimately is expected to have approximately 2 billion cubic feet per day of mainline throughput capacity, which will make it one of the largest gathering and treating systems in the United States. 

The transaction will not have an impact on KMP’s distribution in 2010. It is expected to be accretive to cash available to unitholders beginning in 2011 and significantly accretive thereafter. The general partner of KMP has agreed not to take incentive distributions related to this transaction through year-end 2011. The transaction is subject to customary closing conditions and is expected to be completed by the end of May 2010.



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