An affiliate of Andeavor (NYSE: ANDV) will acquire Rangeland Energy II, which owns and operates the RIO System in the Delaware Basin, in an all-cash transaction expected to close early first-quarter 2018.
Rangeland Energy and its financial sponsor EnCap Flatrock Midstream entered an agreement to sell Rangeland II to Tesoro Refining & Marketing Co. LLC, a wholly owned subsidiary of San Antonio-based Andeavor, for an undisclosed amount, the companies said Jan. 3.
The RIO System is comprised of four core facilities, with additional facilities under development. The RIO Hub rail facility is located about 12 miles south of Carlsbad in Eddy County, N.M., and is the Delaware Basin’s premier frack sand rail-unloading, storage and truck-loading facility, according to the company release.
The RIO Pipeline consists of 110 miles of 12-inch crude oil pipeline, bridging the Delaware and Midland basins with connectivity at the State Line Terminal in Loving County, Texas, and the Geneva and Zurich terminals in Midland, Texas.
Today, the RIO System provides shippers optionality to access the Colorado City, Cushing, Corpus Christi and Houston markets through Midland. Planning for additional Midland connectivity is in progress to offer even greater optionality to shippers on the RIO System, the release said.
“Rangeland II chief operating officer Steve Broker and his team have done an outstanding job of creating value by developing a scalable system with connectivity to the Midland market center and beyond,” Rangeland President and CEO Chris Keene said in a statement. “We look forward to continuing to work with EnCap Flatrock Midstream as we leverage our successful terminaling experience to develop the STEPS Terminal in Corpus Christi and pursue exciting new business opportunities in Canada.”
Substantially all of Rangeland II’s field employees will be invited to remain with the asset as employees of Andeavor. The Rangeland II management team will focus on the expansion of Rangeland Energy III LLC, which is developing the STEPS logistics terminal in Corpus Christi and pursuing midstream opportunities in western Canada.
STEPS is an integrated hydrocarbon logistics system that will receive and store refined products, LPG and other hydrocarbons at a new terminal hub now under construction in Corpus Christi, Texas, and transport them to terminals primarily located in Mexico.
Rangeland Energy is headquartered in Sugar Land, Texas, with regional offices in Loving, N.M., Midland and Calgary, Alberta. The company was formed in 2009 to focus on developing, acquiring, owning and operating midstream infrastructure for crude oil, natural gas, NGL and other petroleum products.
The company's sale of Rangeland II represents EnCap Flatrock Midstream’s second realization with Rangeland, said Bill Waldrip, the private equity firm's managing director and founder.
“Chris Keene and Steve Broker were early to recognize the midstream opportunities in the Delaware Basin and first to market in 2014 with what soon became RIO’s comprehensive logistics platform,” Waldrip said in a statement. “Rangeland management was early to recognize similar opportunities in the Bakken when we first backed them a little more than eight years ago. When you combine extraordinary vision with a team that has the ability to execute as well as the Rangeland team does, you have a recipe for success for our institutional investors and the Rangeland team. It’s been a great relationship, and we look forward to working with Rangeland for many years to come.”
Based in San Antonio, Encap Flatrock manages investment commitments of nearly $6 billion, according to the release. The firm is currently making commitments to new management teams from EFM Fund III, a $3 billion fund.
RBC Capital Markets was the sole financial adviser to Rangeland Energy. Jones Day was the company’s legal adviser. Thompson & Knight LLP provided legal counsel to EnCap Flatrock Midstream. McGuireWoods LLP was Andeavor’s legal counsel.
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