SemGroup Buys Central Alberta Midstream Assets and Another NY Storage Project
Two subsidiaries of Tulsa-based SemGroup L.P. collected new properties last week. SemCanada, L.P. announced Thursday it signed a definitive purchase and sale agreement to buy Central Alberta Midstream (CAMS), the largest licensed sour gas processor in Alberta, from BP Canada Energy and Chevron Canada Resources (CCR). Earlier SemGas L.P. said it acquired a second natural gas storage project in New York State.
The Canadian purchase was expected to close during first quarter 2005 upon completion of regulatory approval. The agreement was signed on Jan.17 and the purchase price was not disclosed. The Calgary-based CAMS's assets include four gas processing plants and more than 600 miles of natural gas gathering pipeline in Alberta. The company employs an office and field staff of about 260. CAMS provides an integrated gathering and processing service with several options for wet or dry, sweet or sour gas gathering and processing, as well as dehydration, field compression, liquid recovery and sulphur forming and handling.
The price of the SemGas L.P. purchase of Greyhawk Gas Storage Co. LLC of Steuben County, NY, from Falcon Northeast Holdings LLC also was not revealed. This was the company's second acquisition of storage facilities in Steuben County in the last three months. The Greyhawk purchase includes the Wyckoff storage development project, designed to provide 6 Bcf of working gas storage, and the Jasper storage development project, which could provide another 6 Bcf of working gas capacity.
"Greyhawk already has a FERC 7 (c) certificate" for the Wyckoff storage project," which "should be commercially operable within the year," said Tom Kivisto, president and CEO of SemGroup. It does not have a certificate yet for the Jasper project. "Coupled with the longer-term expansion potential of Cohocton Valley, these storage assets will provide customers in the New York and New England area the long-term storage services needed as the transportation infrastructure expands beyond its current constraints."
Houston-based Falcon sold its New York storage assets in order to focus its gas storage operating and development efforts on existing facilities in North Texas and its storage development along the Texas, Louisiana and Mississippi Gulf Coast, according to Falcon President and CEO John M. Hopper.
Specifically, Falcon said it plans to use the proceeds from the Greyhawk sale to complete the Phase II expansion of its Hill-Lake Gas Storage facility, which serves the North Texas/Dallas-Fort Worth market, and to advance the development of its MoBay Storage Hub, a high-deliverability, multi-cycle gas storage project that will serve the Southeast and Florida markets.
Late last year the SemGas bought the New Avoca development project in New York state for $3.5 million, which it has renamed Cohocton (see NGI, Nov. 8, 2004). It expects to develop a facility with 5.5 Bcf of working gas capacity, 300-500 MMcf/d of deliverability and 250-300 MMcf/d of injection capacity to be in operation by 2006.
Kivisto said that CAMS is a well established Canadian midstream business with significant upside potential. "The CAMS plants have a working capacity of 900 million cubic feet of gas per day, but their combined licensed capacity is 1.5 billion cubic feet of gas per day. These plants are 100 percent fee-based which makes them excellent complements to our existing business." CAMS will retain its name and logo identity in Canada.
Dave Pope, SemCanada president and COO, said that CAMS's dedicated production is especially attractive to SemCanada. Currently, 30% of the volume being processed is dedicated to the CAMS plants for the life of the reserves. "This acquisition adds to our Canadian energy merchant business, Seminole Canada Gas Co., and provides significant opportunities for producers to access our markets throughout North America," Pope said.
Three sour gas plants are included in the purchase: Kaybob South No. 3, Kaybob Amalgamated and West Whitecourt. The fourth plant, West Fox Creek, is a sweet gas processing facility. At present, the plants process a total of 700 MMcf/d from approximately 1,000 wells in a 25,000 square-mile catch area.
The sale will complete ChevronTexaco's plans first announced in December, 2003 to divest assets in Western Canada, supporting a drive to optimize its North American upstream holdings portfolio. In June, 2004, CCR sold assets to Acclaim Energy Trust and Enerplus Resources Fund. In early July, 2004, KeySpan Facilities Income Fund purchased EnerPro Midstream. CCR is now focused on an aggressive exploration plan and production activities in Atlantic Canada, the Mackenzie Delta and Alberta's oil sands. the company announcement said.
SemGroup, L.P. is a midstream service company providing the energy industry means to move products from the wellhead to the wholesale marketplace. It is ranked #14 on Forbes magazine's list of America's Largest Private Companies. For additional information, visit http://www.semgrouplp.com . In December the company announced it had signed a letter of intent for the sale of a 30% interest in SemGroup to the Carlyle/Riverstone Global Energy and Power Fund II, L.P. exchange for $75 million. The transaction was expected to close in first quarter 2005. The fund has approximately $1.1 billion under management.
Earlier in the year Ritchie Capital Management, LLC, a multi-strategy hedge fund group based in Chicago with $1.4 billion in assets under management, bought the equity position in SemGroup previously owned by Energy Spectrum Partners of Dallas, TX. Ritchie Capital owns a 25% equity position, with semGroup's management team owning 31%.