CorEnergy Infrastructure Trust Inc. acquired Crimson Midstream Holdings LLC, a California Public Utilities Commission (CPUC) regulated crude oil pipeline owner and operator, for consideration valued at approximately $350 million.
The acquired assets include four critical infrastructure pipeline systems spanning approximately 1,800 miles across northern, central and southern California, connecting “desirable native California crude production” to in-state refineries producing state-mandated specialized fuel blends, among other products.
“The Crimson pipeline networks connect multibillion-dollar refining complexes to low declining fields, producing desirable native grades of California crude oil, which is required for blended energy products satisfying state environmental standards,” John Grier, founder and board chairman of Denver-based Crimson Midstream, said in a release announcing the transaction on Feb. 4.
Following the transaction, Grier will become COO of CorEnergy and join the company board of directors. Additional members of Crimson’s executive and operating teams joining CorEnergy include Crimson CFO Robert Waldron, who will become CFO of CorEnergy, and Larry Alexander, President of Crimson California’s operations.
CorEnergy is a real estate investment trust based in Kansas City, Mo., that owns and operates or leases regulated natural gas transmission and distribution and crude oil gathering, storage and transmission pipelines and associated rights-of-way.
The acquired assets from Crimson Midstream qualify for REIT treatment under established IRS regulations and CorEnergy’s private letter ruling (PLR), according to the company release.
“The acquisition of Crimson diversifies CORR’s critical infrastructure portfolio with four new pipeline networks and positions CorEnergy as an owner/operator of utility-like assets in line with expectations for our industry-leading REIT qualifying platform,” commented CorEnergy CEO Dave Schulte in the release on Feb. 4.
“John and his team operate safely and reliably in a highly regulated market, and we plan to leverage their expertise to continue to grow our newly combined company,” he added.
Consideration for the transaction is comprised of $75.6 million of cash on hand, $105 million in new term loan and revolver borrowings, contribution of the Grand Isle Gathering System (GIGS) to the sellers, $119.4 million of commitments to issue common and preferred equity.
The deal would create the largest pure-play northern Midland Basin E&P with a 73,000-net-acre position and 12,000 boe/d of production that is expected to more than double through 2020.
Repsol will still hold a 51% stake in the block after the deal.
The March 20 lease sale in the U.S. Gulf of Mexico brought in $244.3 million in high bids.