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Crosstex, Devon Midstream MLP Close to Launch

A midstream master limited partnership (MLP) formed last year by Devon Energy Corp. and Crosstex Energy LP should be completed and ready to begin operations by the end of March, executives said Wednesday.

Last October Devon provided nearly all of its U.S. midstream assets, then valued at around $4.8 billion, to partner with Crosstex Energy's onshore midstream properties (see Shale Daily, Oct. 21, 2013). Initially, EnLink Midstream would consist of about 800,000 net acres, as well as gas gathering and production assets in assets in the Permian Basin, Gulf Coast and Oklahoma, along with assets serving the shale plays Marcellus, Utica, Barnett, Eagle Ford and Haynesville.

The midstreamer is to consist of EnLink Midstream Partners LP and general partner EnLink Midstream LLC. Devon's midstream asset contribution today is worth an estimated $8 billion, CEO John Richels said Wednesday during a conference call (see related story).

Assuming the MLP offering closes by the end of the first quarter, combined adjusted operating profits through December should approach $525 million, Crosstex said in a forecast. The partnership should contribute around $375 million. On an annualized basis, the forecast equates to around $700 million of combined adjusted operating earnings.

"We are proceeding as planned with closing the transaction," Crosstex CEO Barry E. Davis said. He also is to take the helm of EnLink Midstream. "Our guidance projections illustrate the financial benefits of this strategic combination..."

Projected distributions for fiscal 2014 are forecast at $1.47/unit for the partnership and 80 cents/unit for the general partner. Capital spending in 2Q2014 is expected to be about $300 million, with maintenance spending through the end of 2014 totaling about $130 million.

"After accounting for the inclusion of EnLink, our full-year 2014 midstream operating profit is expected to range from $685 million to $755 million, which is a 40% increase compared to 2013," said Richels. "Beyond the first quarter, the EnLink transaction will have more significant implications on our go-forward financial reporting."

Devon is majority owner of the general partnership at 70% and stakes in the MLP at 53%. The interest held by Crosstex for the full year is expected to be less than $50 million, said Richels.

The deal is a win-win for Devon, he told analysts.

"It's worth noting that the economic reality of the EnLink transaction is very different from the accounting presentation," said Richels. "Devon, in fact, does not own EnLink's assets or revenues, we're not obligated for EnLink's expenses or indebtedness, and EnLink's capital expenditures do not come from our cash balances.

"The economic reality is that we own a large portion of the entities that make up EnLink and receive a large chunk of EnLink's cash distributions...And as EnLink executes its growth plans and increase its payout, our distributions are expected to grow."

PwC partners earlier this month said offerings for MLPs in North America were a standout in 2013, as operators looked for investments to buildout onshore infrastructure (see Daily GPI, Feb. 14).

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