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DCP Midstream Partners Grabs Antrim Gathering and Transportation Stake

To diversify its geographic operational area, DCP Midstream Partners LP has agreed to purchase Michigan Pipeline & Processing LLC (MPP), a privately held company engaged in natural gas gathering and treating services for gas produced from the Antrim Shale of northern Michigan and gas transportation within Michigan, for $145 million.

Under the terms of the acquisition, the partnership could pay an additional $15 million to the sellers depending on the earnings of the assets after a three-year period. DCP Midstream Partners said it intends to pay for the acquisition with debt under its existing credit facility.

"This acquisition provides accretion and future growth opportunities for our unitholders," said DCP Midstream Partners CEO Mark Borer. "These assets have an attractive position in an active drilling area and provide opportunities to pursue additional service links in the midstream value chain. This acquisition allows us to further diversify our operations in a new geographic area while adding 100% fee-based revenues to our contract mix."

Currently the partnership's gas operations are in Louisiana, East Texas, southern Oklahoma, the Piceance Basin in western Colorado and the Powder River Basin in Wyoming.

Managed by its general partner, DCP Midstream GP LLC, which is wholly owned by DCP Midstream LLC, a joint venture of Spectra Energy and ConocoPhillips, the partnership is purchasing 100% of MPP, which owns five limited liability companies. They are:

The Antrim Shale is one of the nation's earliest shale plays, with production of more than 2.5 Tcf from 9,300 wells since the early 1990s. Between 300-400 wells are expected to be drilled each year in the Antrim Shale, with well lives averaging 25-30 years. The Antrim has been called a "mature" Michigan basin that offers "predictable" drilling for about 30 players, led by DTE, Loews Corp., Quicksilver and Terra (see NGI, June 11, 2007; June 4, 2007).

DCP Midstream Partners said the attractiveness of the Antrim Shale play drove significant recent acquisition activity by exploration and production companies who purchased reserves in anticipation of continued drilling in the area. The partnership expects the acquisition to close next month, subject to the satisfaction of various closing conditions, including the termination of any applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

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