San Antonio-based Howard Energy Partners said Thursday it will acquire the Eagle Ford Escondido Gathering System, which is partially owned by Laredo Energy, and the Cuervo Creek Gathering System from Meritage Midstream Services. Both systems are primarily 12- 16-inch diameter high-pressure gas pipelines. The transaction is expected to close in April.
The two systems, located in Webb County, TX, consist of a newly constructed rich natural gas gathering system with 83 miles of pipeline, a 102-mile lean gas gathering system, two leased amine treating plants and multiple intrastate pipeline outlets for regional processing and transportation.
"The addition of these strategic assets enhances the value of our position in the prolific South Texas area so that we may continue to provide integrated midstream solutions to our customers," said Howard President Brad Bynum.
The systems are supported by multiple long-term, fee-based agreements with more than 180,000 dedicated acres and more than 200 Bcf of total volume commitments. The lean and rich gas pipelines have a combined capacity of 400 MMcf/d, of which 80% of the firm capacity is under contract, said Howard, which expects to expand the systems in the near term to meet increased demand for from multiple geologic formations including the Escondido, Olmos, San Miguel, Austin Chalk and Eagle Ford.
"We developed the Eagle Ford Escondido and Cuervo Creek systems through a key producer midstream partnership with Laredo IV from the ground up in just two years. We are very pleased to realize a strong return for our investors, EnCap Flatrock Midstream and TPH Partners, and look forward to working with the [Howard] team on a seamless operational transition for our producers," said Meritage CEO, Steven B. Huckaby.
After closing Howard will own and operate 450 miles of gas gathering pipelines in Webb, Dimmit, Frio, Maverick and Zavala counties in Texas. These systems gather more than 175 MMcf/d and have the ability to quickly expand.
The acquisition will be funded primarily with equity investments in Howard by Crosstex Energy LP, Quanta Services Inc., GE Energy Financial Services and Clear Springs Energy Co. LLC. After closing Crosstex and Quanta will have contributed $87.25 million each to Howard and along with GE Energy Financial Services will each own 30.6% of the outstanding units in Howard.
"The shale boom has created the need for a dramatic build-out of oil and gas infrastructure in North America, requiring significant capital," said John Shepherd, a managing director at GE Energy Financial Services.