Noble Midstream Partners LP (NYSE: NBLX) and Greenfield Midstream LLC announced Dec. 12 the formation of a joint venture, Black Diamond Gathering LLC. The JV has entered into definitive agreements to acquire Saddle Butte Rockies Midstream LLC and affiliates for $625 million. Greenfield Midstream is an EnCap Flatrock Midstream portfolio company.
Noble Midstream will fund 50% of the purchase price and will receive a 4.4% ownership promote in the JV. The partnership’s 54.4% ownership of the JV will be held in a wholly owned Noble Midstream subsidiary, Laramie River DevCo LP. Greenfield Midstream will own 45.6% of the JV.
Saddle Butte assets include a large-scale integrated crude oil gathering system in the DJ Basin, consisting of approximately 160 miles of pipeline in operation, 300,000 barrels per day (bbl/d) of delivery capacity and approximately 210,000 barrels of crude oil storage capacity. Saddle Butte has approximately 115,000 dedicated acres from six customers under fixed fee arrangements, including approximately 72,000 dedicated acres from PDC Energy. Upon the closing of the acquisition, PDC Energy plans to expand its Saddle Butte acreage dedication to approximately 96,000 acres and extend its dedication by five years, bringing the dedication contract duration to approximately 12 years from close.
Noble Midstream will operate and control the Saddle Butte system upon closing, which is expected in first-quarter 2018, subject to customary closing conditions, including the receipt of regulatory approvals. Noble Midstream and Greenfield Midstream will jointly provide commercial efforts to attract further producer dedications.
Highlights:
- Expected to be accretive to Noble Midstream’s Distributable Cash Flow per unit in year one;
- Entry multiple with JV promote in a high-growth asset in a premier liquids basin; expected to compress to organic build-like multiples even without incremental contribution from Noble Midstream or the PDC Energy contract amendment expected upon closing;
- Operational synergies to existing Noble Midstream infrastructure with greater than $70 million in capital avoidance potential from Laramie River DevCo planned infrastructure expansion and storage;
- Significantly expands Noble Midstream’s third-party customer base with oil gathering dedications from six customers, including five new NBLX customers;
- Average of seven rigs on Saddle Butte dedicated acreage in 2017, bringing Noble Midstream’s pro-forma 2017 average rig exposure to 11 in the DJ Basin;
- Saddle Butte current throughput of approximately 55,000 barrels of oil per day;
- Crude storage added to Noble Midstream’s DJ Basin portfolio with planned connections to all four takeaway pipelines; and
- JV structure preserves Noble Midstream’s attractive long-term leverage objectives.
“Saddle Butte is a strategic expansion of our footprint in the DJ Basin, which creates a premier DJ Basin crude gathering system and significantly enhances our third-party customer base. The expanded crude gathering system and JV structure provides Noble Midstream flexibility to enhance returns on future capital projects,” said Terry R. Gerhart, CEO of the general partner of Noble Midstream.
“This acquisition is accretive to our organic financial outlook, competes well with capital returns within the portfolio, and further extends our 20% distribution per unit growth horizon while preserving our conservative leverage position. We also remain focused on our objective to generate 50% of the Partnership’s EBITDA in the Delaware Basin by the end of 2020,” added Gerhart.
“We are excited to partner with Noble Midstream on the formation of Black Diamond and look forward to bringing both our commercial and operations expertise to the table,” said Greenfield CEO Jeremy L. Ham. “This is a powerful combination. The Denver Julesburg Basin is one of the fastest growing plays in the country, Noble Midstream is a world class midstream provider, and we bring strong producer relationships and a long history of creating value for our stakeholders.”
A supplemental presentation related to the transaction is available on the ‘Investors’ page of Noble Midstream’s website, www.nblmidstream.com.
Deutsche Bank Securities Inc. served as financial adviser to Noble Midstream in connection with the transaction and Vinson & Elkins LLP acted as outside legal counsel to Noble Midstream in connection with the acquisition agreement and joint venture. Greenfield Midstream’s financial adviser was Baird and legal counsel was Reed Smith LLP. Thompson & Knight LLP served as legal counsel for Encap Flatrock Midstream.
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