Concho Resources Inc. formed a midstream joint venture (JV) on April 15 to support its continued oil production growth in the Midland Basin region of the Permian.
The Midland, Texas-based shale producer said it agreed to form Beta Crude Connector LLC (BCC) through a JV with Frontier Midstream Solutions IV LLC. BCC will build and provide crude oil gathering, transportation and storage services in the Northern Midland Basin.
Concho and Frontier will each own a 50% equity interest in BCC, with Frontier serving as operator.
The new gathering and transportation system will consist of a roughly 100-mile gathering system, 250,000 barrels of crude oil storage facilities as well as truck terminals. The pipeline system will have the initial capacity to deliver 150,000 barrels per day of crude oil to multiple delivery points, accessing local refineries and connecting to several downstream pipelines, according to a joint press release.
Concho’s planned activity for 2019 is expected to deliver oil growth of 26% to 30% across its roughly 640,000 net acres in the Permian Basin. In the Midland Basin, the company has about 260,000 gross acres.
Jack Harper, president of Concho, commented, “Through the joint venture, we will leverage Frontier’s midstream expertise and enhance the value of our high-quality footprint in the Midland Basin with a reliable, cost-efficient gathering and transportation solution. Importantly, this is a compelling investment opportunity that we can make with no changes to our capital plans.”
Currently, Concho plans to spend between $2.8 billion and $3 billion in 2019, which represents a 17% reduction from the company’s prior capital guidance.
In conjunction with the JV agreement, Concho also agreed to enter into a long-term acreage dedication agreement with BCC.
Following an open season set for April, construction on BCC will commence, targeting initial flows in mid-2019.
BCC will file for FERC authority to operate as a common carrier pipeline and solicit interest from other producers and marketers for capacity on the new system.
Frontier Midstream Solutions, headquartered in Tulsa, Okla., is owned by Frontier Energy Partners II LLC and certain funds of Energy Spectrum Capital.
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