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Crestwood Buys Midstream Assets in Fayetteville, Granite Wash

Privately held Crestwood Midstream Partners LP has completed its acquisition of midstream assets in the Fayetteville Shale in northwest Arkansas and the Granite Wash play in the Texas Panhandle, the Houston-based company said. The deal was announced in February.

Crestwood paid about $338 million cash to Tulsa-based Frontier Gas Services LLC for the assets, which include 127 miles of gathering pipelines in the Fayetteville with a capacity of 510 MMcf/d, treating capacity of 165 MMcf/d and 35,000 hp of compression serving dedicated acreage and gas production under contracts with BHP Billiton Petroleum, BP America and ExxonMobil's XTO subsidiary.

The Granite Wash assets include a 28-mile natural gas and natural gas liquids pipeline system and a 36 MMcf/d cryogenic processing capacity serving dedicated acreage and gas production under contracts with Chesapeake Energy and Linn Energy. Crestwood said it plans to install and have in service by the end of this year a second processing plant with 60 MMcf/d of capacity to support growth in Granite Wash volumes.

The deal and another completed in October, in which Crestwood paid $701 million for midstream assets in the Barnett Shale in North Texas (see Daily GPI, July 26, 2010), are evidence of the company's long-term strategy to expand its geographic and operating footprint, according to CEO Bob Phillips.

"The Fayetteville Shale, like the Barnett Shale, is considered to be a world-class natural gas resource play, and the Granite Wash is a fast-emerging shale play driven by significant natural gas liquids production," Phillips said. "Both of these new areas should provide Crestwood with solid near-term growth and numerous organic expansion opportunities in the future due to long-term acreage dedications associated with the producer contracts under the Frontier acquisition."

Frontier expects the acquisition to be immediately accretive to shareholders and plans to provide updated 2011 guidance "after a short period of integration of the new assets and operations." The Frontier assets will be integrated into Crestwood's Barnett Shale operations during the second quarter, Phillips said.

Crestwood was formed in 2007 and led by former Enterprise Products Partners CEO Phillips (see Daily GPI, Dec. 5, 2007). Blackstone Group and affiliate GSO Capital Partners LP acquired ownership interests in 2008, joining then-owners Kayne Anderson Energy Funds and Crestwood Management LLC (see Daily GPI, June 26, 2008).

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