Save the discussion about organic growth for the next chat with your grocer.
Midstream companies are growing big and strong. Acquisitions add muscle; mergers are used to trim fat. In 2013, merger and acquisition activity in the sector topped $62 billion, a 16% increase from 2012, according to the “IHS Herold Year-End 2013 Midstream Transaction Review.”
“There is no reason to expect this upward trend to wane in the next several years as the pool of midstream assets continues to grow in response to shale play expansion,” the study’s principle author, Cynthia Pross, said in a statement.
Deals in 2013 set an all-time high in value for midstream (if you exclude 2011’s $78 billion total, which was propped up by the $32 billion midstream portion of the Kinder Morgan/ El Paso acquisition), and the smaller number of transactions spoke to the greater heft attached to each one. Fourteen of these deals qualified for the multibillion-dollar club, led by Spectra Energy Corp.’s $11 billion dropdown of U.S. pipeline and storage assets to its master limited partnership (MLP), Spectra Energy Partners.
In 2014, the upward trend continues. A dropdown completed in February from Williams Cos. to its MLP, Williams Partners LP, left the MLP in possession of $1.2 billion of in-service Alberta operations. The deal includes a processing plant near Fort McMurray, about 260 miles of pipelines and other facilities.
Phillips 66 Partners purchased parent Phillips 66 Co.’s Gold Line Product Pipeline system and the Medford spheres, two newly constructed refinery-grade propylene storage spheres, in a $700 million transaction. The Gold Line system consists of a 681-mile refined products pipeline system and two parallel 54-mile lateral lines from the Texas Panhandle to Missouri. The system has a maximum throughput capacity of 132,000 barrels (bbl.) per day and includes four terminals with 172,000 bbl. per day of throughput capacity and 4.3 million bbl. of storage capacity. The Medford spheres in Oklahoma have a total working capacity of 70,000 bbl.
Not a dropdown, but sizable and in line with a strategy of streamlining, was the sale by Chesapeake Energy’s subsidiary, MidCon Compression, of 437 compression units to Access Midstream Partners LP and Enterran Partners LP for $520 million. The midstream assets were spread throughout eight states.
Joseph Markman can be reached at jmarkman@hartenergy.com or 713-260-5208.
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