Rattler Midstream LP, a subsidiary of Diamondback Energy Inc., and Oryx Midstream, late Thursday struck a $355 million agreement to buy Permian Basin-focused Reliance Gathering LLC.
Permian pure-play Diamondback and Oryx, a portfolio company of Stonepeak Infrastructure Partners, said the transaction through their newly formed joint venture (JV) should be completed by year’s end. Rattler, which Diamondback spun off in May, owns 60% of the JV; Oryx would be minority owner and operate the system.
“This strategic acquisition demonstrates Rattler’s ability to leverage its relationship with Diamondback to invest in attractive projects underpinned by Diamondback’s operations, providing unique visibility into the growth in volumes expected on this system,” said Diamondback CEO Travis Stice, who also helms Rattler’s general partner.
“Continuing its wellhead-to-water strategy, Diamondback, through Rattler, will now participate in transporting these crude oil barrels from the wellhead through the Reliance Gathering system and the Epic Crude Pipeline to docks and refineries around Corpus Christi” on the South Texas coast.
The Epic Crude pipeline and parallel Epic natural gas liquids pipe are to transport Permian supply into the Corpus market. The 30-inch diameter crude pipeline was expected to begin interim service by the end of September with permanent service in January.
Oryx, considered the largest privately held crude midstream provider in the Permian, in August said Qatar’s sovereign wealth fund would infuse $550 million into the company to help with future development. The Oryx system is underpinned by nearly one million acres with long-term dedications from more than 20 customers, and it has 2.1 million bbl of storage and about 1,200 miles of in-service and under construction pipeline that spans eight Texas counties and two counties in New Mexico.
The Reliance acquisition “marks our entry into the Midland Basin,” said Oryx CEO Brett Wiggs. He said the transaction “solidifies Oryx as a pure-play, crude oil pipeline operator, and further enhances our ability to serve strong, high-quality producer customers, both new and existing.”
The Reliance system, whose assets are mostly in West Texas within the Midland sub-basin, has an oil gathering system with more than 230 miles of gathering and regional transportation pipelines, as well as 200,000 bbl of storage in Midland, Martin, Andrews, and Ector counties.
The system now has more than 110,000 b/d of throughput from six operators, including Diamondback. Reliance also has more than 160,000 gross acres in the northern part of the Midland dedicated under long-term, fixed-fee agreements.
Diamondback operates about 38% of Reliance’s dedicated acreage, and it produced 35% of the volumes on the system year-to-date through July.
Jefferies LLC is acting as Reliance’s financial adviser while Sidley Austin LLP is legal counsel. Akin Gump Strauss Hauer & Feld LLP is legal counsel for Rattler, and Shearman & Sterling LLP is the Oryx legal counsel.