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TPG Agrees to Buy DJ-Focused Operator Discovery Midstream

The buyout arm of private equity giant TPG Capital is taking over Discovery Midstream Holdings LLC, a Denver-Julesburg (DJ) Basin operator with a natural gas gathering and processing system underway that would serve Colorado operators.

Financial details of the transaction with TGP Growth were not disclosed.

Discovery, whose assets are concentrated in natural gas-rich Weld and Adams counties, is constructing more than 120 miles of pipeline and a 60 MMcf/d processing plant scheduled to come online by the end of September. An expansion planned in 2018 would bring capacity to 260 MMcf/d.

“In partnering with Discovery, we are backing a strong and experienced management team that is building a cost-effective, full-service, high-quality midstream platform in one of the most attractive basins in the U.S.,” said TPG partner Christopher Ortega.

“Since inception, Discovery has done an impressive job of building deep community relationships in Colorado and maintaining a focus on safety, both of which we look forward to continuing under our ownership. We have a long relationship with the Discovery team and are excited to assist the company in continuing its commercial success and growing the platform.”

TPG”s natural resources unit invests across the energy value chain, including in exploration and production, oilfield services, midstream and downstream operations. Investments have included EnLink Midstream, Copano Energy LLC and Jonah Energy LLC. In April TPG launched TPG Pace Energy Holdings, which is run by former Occidental Petroleum Corp. chief Stephen Chazen.

Dallas-based Discovery’s current management team would continue to run the company post-transaction. Discovery, formed in 2015, last year partnered with Old Ironsides Energy LLC, an independent oil and gas investment manager, to pursue infrastructure transactions and greenfield development. Discovery’s core services include gas gathering, processing, treating and compression; crude oil logistics and water logistics.

Discovery is led by managing partners President Mike Davis, Chief Commercial Officer Steven Meisel and CFO Drew Chambers. Additional partners include COO Cory Jordan and Chief Accounting Officer Julie Hartmann. All are former executives of Wildcat Midstream Partners LLC, which was co-founded by Davis in 2011.

“From grassroots development projects to operating and optimizing midstream assets, we founded Discovery with a mission of providing superior service and maximum value for our producers,” said Meisel. “We appreciate the support from our existing equity partners in bringing Discovery to this inflection point, and look forward to accelerating the company’s growth over the next phase of value creation through our partnership with TPG.”

The transaction is expected to close by the end of September. TPG Growth’s legal adviser is Vinson & Elkins LLP, while Discovery’s financial adviser for the transaction is Evercore ISI, and its legal adviser is Weil, Gotshal & Manges LLP.

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