Tulsa-based midstream operator SemGroup on Wednesday agreed to a $300 million cash price for Chesapeake Energy Corp.'s interests in subsidiary Mid-America Midstream Gas Services LLC, that comes with a 20-year gathering and processing contract for 540,000 net acres in the Mississippian Lime play.
Mid-America has 200 miles of gathering pipeline, as well as the Rose Valley I cryogenic processing plant, which is to have 200 MMcf/d of capacity when it starts up in early 2014. The Rose Valley II, another 200 MMcf/d processor, also is part of the deal; it is set to be operational in early 2016.
The dedicated acreage is supported by a recently announced joint venture between Chesapeake and Sinopec International Petroleum Exploration and Production Corp. (see Shale Daily, Feb. 13). Chesapeake agreed to the 20-year, 100% fee-based gas gathering and processing agreement with SemGroup as part of the transaction.
"This purchase expands our scale in highly attractive, liquids-rich areas with strong producer activity and organic growth opportunities, while adding to our future inventory of drop down assets for Rose Rock Midstream," said SemGroup CEO Norm Szydlowski.
Rose Rock Midstream LP was formed by SemGroup to develop midstream properties. It now provides crude oil gathering, transportation, storage and marketing services in six states, with most of its assets located in or connected to the Cushing, OK, crude oil marketing hub.
The two planned Rose Valley plants now being built will require another $125 million to complete, as well as additional capital related to future well connects, SemGroup noted. The transaction, which is being funded by debt, is expected to close by the end of September.
"Combined with our existing facilities, SemGroup will have a total processing capacity of 600 MMcf in Northern Oklahoma, and with approximately 655,000 net-acre dedications within the core of the Mississippi Lime play, opportunity to further grow as production increases."