Hess Corp. (NYSE: HES) is looking to sell its Bakken water services business in a proposed $225 million-cash transaction with a midstream energy joint venture (JV) between Hess and Global Infrastructure Partners (GIP).
The JV, known as Hess Infrastructure Partners LP (HIP), entered a memorandum of understanding with Hess for the transaction, which Hess said Dec. 11 it expects to close first-quarter 2019.
The scope of the water services business includes substantially all of Hess’ Bakken produced water gathering assets and saltwater disposal services in North Dakota. The assets currently consist of over 150 miles of existing Hess water gathering pipelines capturing about 24,000 barrels per day of produced water.
“The expected growth in produced water volumes over the next several years and underdeveloped basin infrastructure creates an attractive opportunity for continued investment to build additional infrastructure for Hess and third parties,” John Gatling, COO of HIP, said in a statement.
Further, Jonathan Stein, CFO of HIP, said he expects the water services business to be underpinned by a long-term contract that includes minimum volume commitments for both produced water gathering and disposal services, and annual tariff rate recalculations for the produced water gathering services, which is consistent with its commitment to deliver “stable cash flows.”
“This contract structure is expected to be complementary with the current contract structure of our existing assets, making the water services business a strong addition to the HIP portfolio,” Stein said in a statement.
Hess first formed the Hess Infrastructure Partners JV in 2015 with the sale of a 50% interest in its Bakken midstream assets to GIP for roughly $2.7 billion. In addition to a mix of midstream assets in the core of the Bakken and Three Forks shale plays in the Williston Basin area of North Dakota, HIP also owns a 100% interest in the general partner of Hess Midstream Partners LP (NYSE: HESM).
Under the terms of the MOU between Hess and HIP, Hess Midstream will be granted a right of first offer to acquire the Bakken water services business in case the JV ever decides to sell the assets.
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Expect plenty of capital, plenty of volatility, plenty of shifts in investor strategies—and plenty of unfolding stories to track as the new year progresses.