Blackstone’s $2 Billion Adds EagleClaw Midstream In Delaware Basin

Blackstone Energy Partners LP will buy EagleClaw Midstream Ventures LLC for $2 billion cash, the companies said April 17 as the Permian Basin’s infrastructure A&D shows signs of picking up.

EagleClaw, the largest privately held midstream operator in the Delaware Basin in West Texas, operates natural gas pipelines and a gathering system that zigzag across Reeves, Ward and Culberson counties, Texas, for more than 375 miles. The Midland, Texas-based company is backed by EnCap Flatrock Midstream.

EagleClaw’s processing capacity includes 320 million cubic feet per day (MMcf/d) with an additional 400 MMcf/d under construction. The company, which will retain its leadership team and name, has long-term natural gas commitments from oil and gas operators producing from more than 220,000 acres.

Blackstone’s acquisition follows NuStar Energy LP’s (NYSE: NS) entry into the Midland Basin on April 11 with an agreement to buy Navigator Energy Services LLC for $1.5 billion.

Some analysts have said that takeaway capacity, particularly for liquids, could be problematic in the Permian by the end of 2017. E&Ps have expressed confidence that won’t be the case.

Blackstone’s transaction is expected to close by July. The purchase includes debt financing by Jefferies LLC of about $1.25 billion.

Bob Milam, EagleClaw president and CEO, said the transaction advances the company’s growth after a five-year relationship with EnCap Flatrock of San Antonio, Texas. EnCap backed EagleClaw with $350 million.

“As we begin a new chapter, we will continue to deliver the same outstanding level of service our customers expect while we work with Blackstone to deploy additional capital and to expand our footprint in the Delaware Basin,” Milam said. “Blackstone has a deep understanding of the compelling fundamentals of the upstream and midstream economics in the Permian, an outstanding reputation as an investor in the energy sector and the scale to take EagleClaw to the next level.”

EagleClaw provides natural gas producers with gathering, compression, treating, processing and transportation services.

The company’s processing facilities serve producers targeting stacked pay zones in the Delaware’s Upper and Middle Wolfcamp, Bone Spring and the Avalon Shale formations, according to EagleClaw’s website.

EagleClaw’s pipelines have connections to Lone Star’s West Texas Gateway Pipeline, which transports NGL to Mont Belvieu, Texas.

The company’s East Toyah complex is also connected to Kinder Morgan Inc.’s (NYSE: KMI) El Paso 1600 Pipeline. It’s also planned to connect to Oneok Partners LP’s (NYSE: OKS) WestTex Transmission System and the Roadrunner Gas Transmission Pipeline.

In 2006, EagleClaw purchased PennTex Permian LLC, a wholly owned subsidiary of PennTex Midstream Partners LLC. PennTex became integrated into EagleClaw’s Pecos System in Ward.

David Foley, senior managing director of Blackstone and CEO of Blackstone Energy Partners, said its ability to access capital and its position as owner of oil and gas producers in the region made Blackstone a fit for EagleClaw.

“We are pleased to partner with management to ensure EagleClaw is well positioned to continue to serve the rapidly growing future needs of its expanding customer base, creating additional jobs for American workers and providing significant benefits to the economy,” Foley said.

In August, Blackstone (NYSE: BX) and Jetta Operating Co. Inc. formed Jetta Permian to target assets and leasehold in the Delaware Basin in West Texas and southern New Mexico. Blackstone Energy Partners and Jetta committed $1 billion to Jetta Permian.

Jefferies was EagleClaw’s exclusive financial adviser and the sole provider of the committed debt financing. Blackstone was advised by Morgan Stanley & Co. LLC and Intrepid Partners LLC.

Frost Brown Todd LLC served as legal counsel to EagleClaw. Thompson & Knight LLP represented EnCap Flatrock Midstream. Blackstone was represented by Vinson & Elkins LLP.

Darren Barbee can be reached at dbarbee@hartenergy.com.