NGL Energy Partners LP agreed to a multimillion-dollar acquisition on Sept. 26 set to boost the Tulsa, Okla.-based company’s growing water midstream footprint in the Permian Basin.
In the agreement, NGL Energy Partners will acquire all of the equity interests of Hillstone Environmental Partners LLC, owner of a produced water transportation and disposal system located in the Northern Delaware Basin, from Golden Gate Capital for $600 million. NGL plans to fund the acquisition through preferred equity and debt commitments.
Mike Krimbill, NGL’s CEO, said the Hillstone transaction is highly complementary to the company’s Delaware Basin asset footprint, which NGL claimed earlier this year to be the largest following its acquisition of Mesquite Disposals Unlimited LLC.
“We have made substantial progress in our ongoing water strategy in the Delaware Basin, and the Hillstone acquisition represents another important milestone for our Water Solutions franchise following the closing of our combination with Mesquite in July,” Krimbill said in a statement on Sept. 26.
Hillstone’s Northern Delaware Basin system provides water pipeline and disposal infrastructure solutions to producers with a core operational focus in the state line area of southern Eddy and Lea counties, N.M, and northern Loving County, Texas. The company has an aggregate of over 110,000 acres contracted under long-term dedications with priority disposal rights or minimum volume
The system currently consists of 19 saltwater disposal wells, representing roughly 580,000 barrels per day (bbl/d) of permitted disposal capacity, and a newly-built network of produced water pipelines with about 680,000 bbl/d of transportation capacity. Hillstone also has an additional 22 permits to develop another 660,000 bbl/d of disposal capacity, according to the NGL Energy Partners press release.
NGL expects to integrate the Hillstone system into its existing Delaware Basin platform to maximize uptime and redundancy for its producer customers.
Doug White, NGL’s executive vice president of water solutions, said the integration of the Mesquite assets is fully underway.
“The certainty of offtake and reliability of our integrated system of large diameter pipelines will provide approximately 2.7 million barrels per day of operational disposal capacity in the Delaware Basin, including the addition of Hillstone,” White added in a statement.
This transaction, which NGL estimates has been made at an roughly 7x multiple of forecasted run-rate EBITDA once certain contracted volumes are online next year, is expected to be accretive to distributable cash flow per unit in fiscal 2021, the first full year of ownership, the company release said.
Barclays is financial adviser to NGL. Barclays and Jefferies have provided a committed debt financing to NGL to support the transaction. Winston & Strawn LLP is NGL’s legal counsel on the Hillstone transaction. Hunton Andrews Kurth LLP is serving as the company’s legal counsel on the financing transactions.
Tudor, Pickering, Holt & Co. and Jefferies are financial advisers to Golden Gate Capital and Hillstone. Kirkland & Ellis LLP and Nob Hill Law Group PC provided legal counsel to Golden Gate Capital and Hillstone.
Recommended Reading
Oceaneering Won $200MM in Manufactured Products Contracts in Q4 2023
2024-02-05 - The revenues from Oceaneering International’s manufactured products contracts range in value from less than $10 million to greater than $100 million.
E&P Highlights: Feb. 5, 2024
2024-02-05 - Here’s a roundup of the latest E&P headlines, including an update on Enauta’s Atlanta Phase 1 project.
CNOOC’s Suizhong 36-1/Luda 5-2 Starts Production Offshore China
2024-02-05 - CNOOC plans 118 development wells in the shallow water project in the Bohai Sea — the largest secondary development and adjustment project offshore China.
TotalEnergies Starts Production at Akpo West Offshore Nigeria
2024-02-07 - Subsea tieback expected to add 14,000 bbl/d of condensate by mid-year, and up to 4 MMcm/d of gas by 2028.
US Drillers Add Oil, Gas Rigs for Third Time in Four Weeks
2024-02-09 - Despite this week's rig increase, Baker Hughes said the total count was still down 138 rigs, or 18%, below this time last year.