Summit Midstream To Buy Bakken Assets
Closed the acquisition of the Bison system in North Dakota.
Summit Midstream Partners LP (NYSE: SMLP) entered into two separate acquisitions of unrelated natural gas gathering systems totaling US $460 million in the Bakken and Marcellus shale plays.
The transactions will be financed under Summit's recently upsized US $600 million revolving credit facility and the issuance of US $150 million of common units and general partner interests in Summit to wholly owned subsidiaries of Summit Midstream Partners LLC. Summit expects these transactions to be immediately accretive to distributable cash flow on a per unit basis.
Bison Midstream LLC is engaged in associated natural gas gathering in Mountrail and Burke counties in North Dakota. The Bison system consists of 300 miles of low-pressure and high-pressure gas gathering pipelines and six compressor stations with 5,950 horsepower of compression. Total throughput capacity on the system is in the process of being expanded from approximately 20 million cubic feet per day to 30 million cubic feet per day with the installation of new compression which is expected to be completed by the end of 2013. Volume throughput on the Bison system is underpinned by minimum volume commitments from its anchor customers which represent, on average, 80% of projected annual revenue over the next several years.
Summit closed and funded the US $250 million drop down acquisition of Bison, an indirect, wholly owned subsidiary of Summit Investments, with US $200 million of cash drawn under Summit's revolving credit facility and US $50 million of common units and general partner interests in Summit issued to wholly owned subsidiaries of Summit Investments at a price of US $31.53 per unit. This price represents the five day volume weighted average price of Summit units as of the market close on June 3.
In a separate, unrelated transaction, on June 4, Summit executed definitive agreements with an affiliate of MarkWest Energy Partners LP, pursuant to which Mountaineer Midstream Co. LLC, an indirect, wholly owned subsidiary of Summit, has agreed to acquire, for US $210 million in cash, certain natural gas gathering and compression assets in the liquids-rich window of the Marcellus shale play, primarily located in Doddridge County, W.Va. The Mountaineer Gathering System consists of over 40 miles of newly constructed, high-pressure gas gathering pipelines, certain rights-of-way associated with the pipeline, and two compressor stations with over 21,000 horsepower of compression. This rich-gas gathering and compression system serves as a critical inlet to MarkWest's world-class Sherwood Processing Complex, which is currently being expanded from 400 million cubic feet per day to 800 million cubic feet per day. The Mountaineer Gathering System is currently capable of delivering 550 million cubic feet per day to the Sherwood Processing Complex and is underpinned by a long-term, fee-based contract with an affiliate of Antero Resources Inc. The Mountaineer transaction is expected to close on or before June 30.
The Mountaineer transaction will be financed with US $110 million of borrowings under Summit's recently upsized US $600 million revolving credit facility and the issuance of US $100 million of Summit common units and general partner interests to wholly owned subsidiaries of Summit Investments. Summit Investments and Summit have entered into a unit purchase agreement pursuant to which Summit Investments has agreed to purchase the units at a price of US $31.53 per unit. This price represents the five day volume weighted average price of Summit units as of the market close on June 3.
Summit’s wholly owned subsidiary, Summit Midstream Holdings LLC, also exercised the US $50 million accordion feature on its revolving credit facility to increase the capacity from US $550 million to US $600 million, effective June 4. The other terms of the revolving credit facility put in place on May 7, 2012 remain unchanged.
The terms of the Bison drop down transaction were approved by the board of directors of Summit's general partner and by the board's conflicts committee, which consists entirely of independent directors. The conflicts committee engaged Evercore Partners to act as its independent financial advisor and to render a fairness opinion, and Akin Gump Strauss Hauer & Feld LLP to act as its legal advisor. Summit Investments engaged Barclays Capital Inc. to act as its financial advisor and Vinson & Elkins LLP to act as its legal advisor on both transactions.
Summit Midstream Partners LP owns and operates midstream energy infrastructure assets that are located in unconventional resource basins. The company operates as a subsidiary of Summit Midstream Partners LLC and is headquartered in Dallas.