Energy midstream partnership Eagle Rock Energy Partners LP announced two strategic acquisitions Monday that together are worth an estimated $264.4 million. In addition to the acquisitions, Eagle Rock named a new chairman/CEO.
In a privately negotiated transaction, Houston-based Eagle Rock is acquiring Laser Midstream Energy LP for $136.8 million, paying $110 million in cash and giving Laser 1.4 million Eagle Rock common units. The Laser assets include more than 405 miles of gathering systems and related compression and processing facilities in South and East Texas and North Louisiana. Processing capacity is 125,000 Mcf/d, and throughput is 140,000 Mcf/d.
"The Laser systems provide an excellent complement to our existing midstream assets in the Texas Panhandle and East Texas by expanding our geographic footprint into additional active drilling areas and providing for greater basin and producer diversity," said current Eagle Rock CEO Alex Bucher. "The stability of Laser's fee-based revenues, the quality of its existing asset base, its outstanding commercial, operating and administrative personnel and the significant drilling activity and organic growth opportunities around the systems, make this acquisition consistent with our stated growth strategy in the midstream sector."
Eagle Rock also agreed to acquire fee minerals, royalties and working interest properties from Montierra Minerals & Production LP and NGP-VII Income Co-Investment Opportunities LP for $127.6 million, which includes 6.4 million Eagle Rock common units and $6 million in cash. Montierra is a Natural Gas Partners VII LP portfolio company and NGP-VII Income is a Natural Gas Partners affiliate.
The Montierra assets, located in multiple producing trends across 17 states, include interests in more than five million gross mineral acres and 420,000 net mineral acres. Its interests in more than 2,500 wells have net proved producing reserves of 4.6 Bcf and 2.5 million bbl and a reserve life index (based on proved producing reserves only) of 11 years. In addition, Eagle Rock said the assets possess "significant regeneration potential, which is not reflected in the proved producing reserves."
As part of the Montierra transaction, Montierra CEO Joseph A. Mills will become Eagle Rock's chairman and CEO. Previously, Mills worked for Sonat Exploration Co. and El Paso Production Co. Bucher will remain president of Eagle Rock, and he also has been named COO.
"The combination of Eagle Rock's quality midstream assets with Montierra's stable, long-lived mineral and royalty assets will create an excellent platform for future growth in the midstream and E&P sectors," said Mills. "Significant acquisition opportunities will now become available to Eagle Rock in the large, highly fragmented and liquid E&P sector, in addition to the potential for E&P asset drop-downs from our sponsor, Natural Gas Partners. Together with Eagle Rock's existing midstream business, the combination will have tremendous potential for distribution growth going forward."
Billy Quinn, a managing partner of Natural Gas Partners and current Eagle Rock chairman, added, "We see in this combination of midstream and mineral interests a creative, synergistic and highly effective strategy to capture the value creation along the natural gas and crude oil value chains. The opportunity to drop-down additional companies and assets from Natural Gas Partners' portfolio of E&P investments will complement Eagle Rock's acquisition strategy going forward."
The Laser acquisition is expected to contribute $15.5-17.5 million of annual adjusted earnings. Maintenance capital is estimated at $1.5-2.0 million on an annual basis. The Montierra assets are expected to generate $14-16.5 million of annual adjusted earnings with no maintenance capital requirements. Both transactions are expected to close later this month.
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