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Midstreamers Combine Forces in Denver-Julesburg JV to Buy Saddle Butte Rockies

Black Diamond Gathering LLC, a joint venture (JV) formed by Noble Midstream Partners LP and Greenfield Midstream LLC, has agreed to pay $625 million for Saddle Butte Rockies Midstream LLC and affiliates.

Saddle Butte assets include a large-scale integrated crude oil gathering system in the Denver-Julesburg (DJ) Basin, consisting of 160 miles of pipeline in operation, 300,000 b/d of delivery capacity and approximately 210,000 barrels of crude oil storage capacity.

Saddle Butte has 115,000 dedicated acres from six customers under fixed fee arrangements, including 72,000 dedicated acres from PDC Energy. At closing of the deal, which is expected in 1Q2018, PDC Energy plans to expand its Saddle Butte acreage dedication to 96,000 acres and extend its dedication by five years, bringing the dedication contract duration to about 12 years from close, the companies said.

Noble Midstream would operate and control the Saddle Butte system, while Noble Midstream and Greenfield Midstream would jointly provide commercial efforts to attract other producer dedications.Noble Midstream would fund 50% of the purchase price and receive a 4.4% ownership promotion in the JV. The partnership’s 54.4% ownership of the JV would be held in a wholly owned Noble Midstream subsidiary, Laramie River DevCo LP. Greenfield Midstream would own 45.6% of the JV.

The acquisition is expected to be accretive to Noble Midstream’s distributable cash flow per unit in year one.

There have been an average of seven rigs on Saddle Butte dedicated acreage in 2017, bringing Noble Midstream’s pro forma 2017 average rig exposure to 11 in the DJ Basin.

“Saddle Butte is a strategic expansion of our footprint in the DJ Basin, which creates a premier DJ Basin crude gathering system and significantly enhances our third-party customer base,” said Terry Gerhart, CEO of the general partner of Noble Midstream. “The expanded crude gathering system and JV structure provides Noble Midstream flexibility to enhance returns on future capital projects,” stated Terry R. Gerhart, Chief Executive Officer of the general partner of Noble Midstream.

Noble Energy Inc. capped its exit from the Appalachian Basin in May, announcing a deal to sell its remaining midstream interests there to private equity firm Quantum Energy Partners for $765 million. As Noble has turned its attention to the Denver-Julesburg (DJ) Basin, the Permian Basin's Delaware sub-basin and the Eagle Ford Shale, its exit from Appalachia began last year when a 50/50 Marcellus Shale joint venture (JV) with Consol Energy Inc. was dissolved.

Greenfield Midstream is an EnCap Flatrock Midstream portfolio company. In July, EnCap Flatrock, a partnership of EnCap Investments LP and Flatrock Energy Advisors, announced a $300 million equity commitment to Greenfield Midstream, a privately held company focused on organically developing North American midstream infrastructure. Houston-based Greenfield's services include natural gas gathering, processing, treating and compression; crude oil gathering and transportation; water handling, and product marketing.

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