Noble Midstream Partners LP (NYSE: NBLX) and Plains All American Pipeline LP (NYSE: PAA) have entered a joint venture (JV) agreement to buy the Advantage Pipeline LLC in the Southern Delaware Basin in a deal totaling $133 million.

Each company will own 50% of the Advantage JV, which runs through Pecos and Ward counties, Texas, to Crane County, Texas. The deal speaks to the intensified midstream activity expected in the Permian as midstream infrastructure companies rush to meet expected demand in the basin.

Noble Midstream will operate the 70-mile, 16-inch crude oil line, which has a capacity of 150,000 barrels per day (Mbbl/d).

Advantage offers access to Plains’ Midland, Texas, crude network and to Magellan Midstream Partners LP’s (NYSE: MMP) Longhorn Pipeline. In fourth-quarter 2016, the line’s throughput was 42 Mbbl/d.

Noble Midstream, an MLP formed by Noble Energy Inc. (NYSE: NBL), said it plans to construct a 15-mile pipeline connecting a central gathering facility in the Southern Delaware to a pump station that is estimated to be operational in second-quarter 2017.

The line, built in 2013, will provide shippers with connections to multiple long-haul origination points with access to the Gulf Coast, Midland, Texas, and Plains’ pipeline network.

The deal continues Plains’ expansion in the Delaware, said Elvira Scotto, an analyst at RBC Capital Markets LLC.

“We view PAA’s acquisition of a 50% interest in the Advantage Pipeline positively, as the newly formed JV will increase PAA’s exposure to the prolific Delaware Basin,” Scotto said, adding the deal will not add to the company’s leverage. “While the press release did not provide any financial information, we suspect PAA paid about 20x EV/EBITDA for its share, consistent with recent Permian Basin transactions.”

Plains said it will construct a pipeline to connect its Wolfbone Ranch facility to the Advantage Pipeline near Highway 285 in West Texas. The connections are estimated to be completed in the second quarter of this year.

The Advantage Pipeline will be contractually supported by an acreage dedication from Noble Energy and a volume commitment from Plains Marketing LP. The amount of acreage was not disclosed.

The Advantage Pipeline includes about 490 Mbbl of combined crude storage at three separate trucking stations.

Advantage’s offload stations are:

  • Highway 285 Station, 13 miles south of Pecos, Texas;
  • Highway 18 Station, 22 miles south of Monahans, Texas; and
  • Crane West Station, 4 miles west of Crane, Texas.

Noble Midstream will purchase its interest with $66.5 million cash on hand and revolving credit. Plains, an MLP, will pay its 50% share by issuing units to certain sellers at closing.

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

Comments