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Crosstex Expands Utica Operations with Clearfield Energy Buy

Crosstex Energy LP will pay about $210 million to buy privately held pipeline services provider Clearfield Energy Inc., a deal that would significantly expand its crude oil and condensate services in the Utica Shale, the Dallas-based partnership said Tuesday.

"Clearfield currently moves approximately 30% of the oil production in Ohio and provides a solid entry into the Utica Shale play, where major producers have acquired significant acreage positions," Crosstex said. Clearfield is a crude oil, condensate and water services company with operations in Ohio, Kentucky and West Virginia.

The partnership plans to fund the transaction through a combination of debt and equity. The deal is expected to be completed in July and to be immediately accretive to distributable cash flow.

Crosstex plans to leverage Clearfield's first-mover position in crude and condensate services in the Utica and believes its core capabilities and strong financial position will enable it to leverage Clearfield's strategically positioned assets and operational platform to accelerate growth. "This platform will better enable the partnership to compete for natural gas gathering and processing opportunities in the emerging Utica Shale play," Crosstex said.

Clearfield's assets include a crude oil barge loading terminal on the Ohio River; a 28,000 b/d crude oil rail loading terminal on the Ohio Central Railroad network, which is expected to expand to a 56,000 b/d facility later this year; 200 miles of crude oil pipelines in Ohio and West Virginia; and six brine water disposal wells, with two more under development. Those assets are currently about 50% utilized, Crosstex CEO Barry E. Davis said during a conference call with analysts Tuesday.

"It is a big step in the execution of our strategy to grow and diversify our business, providing a new geographic footprint and expanded service offerings for us," Davis said. "Clearfield provides Crosstex with an entrance in the rapidly developing Utica Shale play, which we believe will be a strong, sustainable growth platform for us."

Meanwhile, Crosstex is increasing its capacity to transload crude oil from rail cars to both barges and pipelines at its Riverside fractionation facility in southern Louisiana from approximately 4,500 b/d to approximately 14,500 b/d. Phase I modification of the Riverside facility, which allowed crude as well as natural gas liquids (NGL) to be transloaded from rail to barge, has been in operation since January. The Phase II expansion is expected to be operational in the first quarter of 2013, Crosstex said.

Crosstex recently upsized its Cajun-Sibon NGL Louisiana-Texas pipeline extension project and plans to have it in service during the first half of 2013 (see Shale Daily, Feb. 9). The 130-mile, 12-inch diameter pipeline is to extend the partnership's existing 440-mile Cajun-Sibon NGL system and connect Crosstex's NGL fractionation facilities in south-central Louisiana to Mont Belvieu supply pipelines in East Texas. Construction is to begin in the third quarter.

The partnership reported 1Q2012 earnings before interest, taxes, depreciation and amortization of $58.5 million, an increase of 9.1% compared with $53.6 million in 1Q2011.

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