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Canadian Investment Fund Buys $500 Million Stake in Howard Energy

The Alberta government’s investment arm announced Monday that it has agreed to purchase a $500 million stake in Howard Energy Partners LLC, a San Antonio-based midstream company with assets in the Eagle Ford and Marcellus shales but also recently expanding into Mexico.

In a statement, the Alberta Investment Management Corp. (AIMCo) said it completed its initial purchase of US$300 million in Series B Preferred Units in Howard Energy on Monday, and is committed to buying an additional US$200 million in units in the future. The purchases were made "on behalf of certain of its clients."

AIMCo CEO Kevin Uebelein said Howard Energy "has set forth a plan to position the company for further growth that will see it executing on a number of key projects backed by long-term contracts with creditworthy counterparties, which when complete will contribute meaningfully to its growth as a diversified midstream company."

Howard Energy CFO Scott Archer also waxed optimism over the deal. "AIMCo is a global institutional investor that not only understands our business, but has the patience and vision to work alongside our team and current partners to maximize long term value for all stakeholders," Archer said.

As an arms-length financial agency of the Alberta government formed in 2008, AIMCo manages CDN$90 billion (US$69 billion) in 31 pension, endowment and public funds. The organization has a mandate to find investments that earn reliable, lasting returns and is not confined to supporting only Alberta’s role as the top natural gas and oil-producing region of Canada.

According to the Howard Energy website, the midstream company owns and operates more than 500 miles of gathering systems in the Eagle Ford and Marcellus shales.

In the Eagle Ford, Howard Energy has a 344-mile gathering system in Texas's Dimmit, Frio, Maverick and Zavala counties, with interconnections to Enterprise, Energy Transfer, Texas and West Texas Gas pipelines. The company also operates a 122-mile Eagle Ford gathering system and an 85-mile Cuervo Creek gathering system, both of which are located in Webb County, TX.

In the Marcellus, Howard Energy owns and operates the 85-mile Greenzweig gathering system in Bradford County, PA, and the 14-mile Lycoming gathering system in Lycoming County, PA. The systems have 45,000-horsepower (hp) and 8,000-hp of compression, respectively.

Howard Energy’s other assets include the Reveille Processing Plant, which has 200 MMcf/d of cryogenic processing capacity, in Webb County; the Live Oak Railroad Park and the 15,000 b/d Live Oak Stabilizer in Live Oak County, TX; and liquid storage facilities in Brownsville, TX. Howard Energy also holds a majority interest in the GT Omniport Terminal near Port Arthur, TX.

Last June, FERC gave Howard Energy unit Impulsora Pipeline LLC authorization to build cross-border natural gas pipeline facilities between Mexico and the United States (see Shale DailyJune 17). The Federal Energy Regulatory Commission had previously given permission to Columbia Pipeline LLC to build parallel 36-inch and 12-inch diameter pipelines (see Shale DailyMay 15, 2015), but Impulsora has since determined that only the 36-inch diameter pipeline will be necessary. The project [CP16-70] will carry Eagle Ford gas to markets in Mexico.

Howard Energy announced last year that it would proceed with plans to build the Nueva Era Pipeline between Texas and Mexico with a joint venture partner, Mexico's Grupo Clisa (see Shale DailyAug. 12, 2015). The 200-mile, 30-inch diameter Nueva Era Pipeline would connect Howard Energy's hub in Webb County to Escobedo in Nuevo Leon, Mexico, and to the Mexico National Pipeline System in Monterrey, Mexico. Mexico's state-owned electric utility, the Comision Federal Electricidad, has signed up for more than 500 MMcf/d of capacity.

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