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Alberta Fund Buys More of Howard Energy; Seller EnLink Expanding in STACK

Alberta government investment arm Alberta Investment Management Corp. (AIMCo) has agreed to acquire a 28% stake in Howard Energy Partners (HEP) from EnLink Midstream Partners LP. Meanwhile, EnLink said it is investing more in the Oklahoma’s STACK play, the Sooner Trend of the Anadarko Basin, mostly in Canadian and Kingfisher counties.

The HEP transaction is expected to close during the first quarter. AIMCo made an initial $500 million investment in San Antonio-based HEP last August and would become HEP's second-largest unitholder.

HEP is a midstream company with assets in the Eagle Ford Shale in South Texas, along the Gulf Coast of Texas, as well as in the Marcellus Shale in Pennsylvania. HEP affiliate Howard Midstream Energy Partners LLC is developing the Nueva Era Pipeline, a 50-50 joint venture with Mexico-based energy and services firm Grupo Clisa, connecting HEP's existing Webb County Hub in South Texas directly to Escobedo, Nuevo Leon, Mexico, and to the Mexican National Pipeline System in Monterrey, Mexico. Mexico's Comision Federal de Electricidad would be the foundation shipper on the 200-mile, 30-inch diameter pipeline.

"Since our preferred investment in August, we have forged a strong working relationship with Howard Energy Partners' management team, as well as with the other investment partners, and we are confident in their opportunities for continued growth in the future," said AIMCo CEO Kevin Uebelein.

Dallas-based EnLink said the sale of the HEP interest -- along with the recent closure of a deal to sell about 140 miles of natural gas pipeline in the Barnett Shale of North Texas to Atmos Energy Corp. -- would bring it $275 million in net proceeds.

"Proceeds from these noncore asset sales and planned 2017 estimated at-the-market equity issuances are expected to fund a majority of the equity portion of EnLink's 2017 capital expenditure requirements, including the upcoming $250 million installment payment related to the acquisition of certain Tall Oak Midstream LLC subsidiaries," EnLink said.

"Exceptional producer activity and well results in the STACK" have prompted EnLink to proceed with the development of its Chisholm III project, a 200 MMcf/d processing expansion of its existing Central Oklahoma system, which is expected to be operational by year-end 2017.

"These noncore divestitures are an extension of our strategy to strengthen our investment-grade balance sheet, consolidate around our core, and provide additional flexibility to strategically reinvest capital in key growth projects," said CEO Barry E. Davis. "The Chisholm III expansion project solidifies EnLink's presence as one of the top midstream providers in the STACK, an area that continues to outperform, and underscores our strategy of positioning ourselves in the top regions with extraordinary growth potential."

Upon completion of the Chisholm III expansion, EnLink's Central Oklahoma processing capacity would total about 1 Bcf/d, which represents nearly a threefold increase from the 350 MMcf/d of capacity operated in 2015 and makes EnLink one of the largest gas processors in the STACK, the company said.

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