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Duncan Energy Takes Interest in Midstream Assets

Duncan Energy Partners LP has acquired partnership interests in three midstream energy companies from affiliates of Houston-based Enterprise Products Partners LP in a $730 million deal announced last week.

Duncan, also based in Houston, acquired a 51% membership interest in Enterprise Texas Pipeline LLC; a 51% general partnership interest in Enterprise Intrastate LP; and a 66% general partnership interest in Enterprise GC LP. These companies own more than 8,000 miles of gas pipelines with 5.6 Bcf/d of capacity; a leased gas storage facility with 4.4 Bcf of capacity; more than 1,000 miles of natural gas liquids (NGL) pipelines; approximately 18 million bbl of leased NGL storage capacity; and two NGL fractionators with a combined capacity of 87,000 b/d. All of the assets are in Texas.

Duncan was formed to own interests in some of Enterprise Products Partners' Gulf Coast midstream assets (see NGI, Nov. 6, 2006). It had its IPO last year.

Duncan paid Enterprise $280.5 million in cash and issued to Enterprise approximately 37.3 million of Class B units of Duncan with a market value of $449.5 million.

Assets in the deal are:

"This acquisition significantly expands our base of midstream energy assets in Texas and diversifies our sources of fee-based cash flow," said Duncan CEO Richard H. Bachmann. "Not only are the Enterprise Texas natural gas pipelines and related assets strategically located in high-demand areas with access to prolific natural gas supply regions in Texas, including the Barnett Shale region, but these assets give Duncan Energy control of significant sources of supply for the assets in which Duncan Energy acquired ownership interests from Enterprise in February 2007 in connection with its IPO. For instance, the interests in the Shoup and Armstrong fractionators being acquired in connection with this transaction are currently the sources of the NGLs being transported by our South Texas NGL pipeline system and stored in our Mont Belvieu NGL storage facility. We now have ownership interest in over 10,000 miles of natural gas, NGL and petrochemical pipelines and 3 Bcf/d of natural gas transportation capacity."

In October Enterprise Products Partners CEO Michael A. Creel told financial analysts that 2009 could offer the company some acquisition opportunities as he expects assets to be more reasonably priced and financial strife to take some competitors out of competition (see NGI, Oct. 27).

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