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Crestwood Details Multi-Step Buildout in Delaware Basin

Crestwood Midstream Partners LP plans to further expand its Willow Lake Project in the Permian’s Delaware Basin with conversion of a portion of its Las Animas gas gathering system to rich gas service and construction of a cryogenic gas processing plant.

The first phase of the Willow Lake Project in Eddy County, NM, was originated in 2013 through the conversion of an existing Crestwood gathering pipeline and installation of natural gas liquids (NGL) field separation equipment to support the drilling efforts of Legend Natural Gas III LP, a subsidiary of Legend Production Holdings LLC, which is a Riverstone Holdings LLC portfolio company targeting the Second Bone Spring formation.

Based on Legend's 2013 drilling program, Crestwood and Legend have entered into a 10-year, fixed-fee gas gathering and processing agreement covering an area of mutual interest of more than 107,000 acres in the Willow Lake area. Additionally, Crestwood has purchased Legend's existing gas gathering system, which is being integrated into Crestwood's footprint.

Anchored by the Legend contract, the second phase of Willow Lake is to include construction of a cryogenic gas processing facility (Willow Lake Plant) with a capacity of 20 MMcf/d and gathering pipelines across the dedication area to support Legend's 2014 and 2015 drilling program.

"The project expands our footprint around the Las Animas system and further establishes an early-mover position in an under-served area of the Delaware Basin," said Robert G. Phillips, CEO of Crestwood's general partner.

Upon completion of the Willow Lake Plant, Crestwood said it expects to undertake a third expansion phase of the Willow Lake gathering system and install a second gas processing plant (Delaware Ranch Plant) with an anticipated capacity of 120 MMcf/d. The Delaware Ranch Plant is owned by Crestwood as a result of its 2012 acquisition of Devon Energy Corp.’s West Johnson County gathering system and processing plant in the Barnett Shale.

Phase 2 of the Willow Lake expansion plan is estimated to cost $25-30 million and be completed in the third quarter. Phase 3 is to be initiated when producers drill sufficient wells to warrant more processing capacity.

Crestwood said it would be buying the NGLs produced at the plants, and this may include initial trucking, pipeline and marketing services.

The Permian’s Delaware Basin is an emerging oil and natural gas liquids-rich region with about 200,000 boe/d of current production, according to Crestwood. Production is supported by producer economic returns of approximately 50% from the Bone Spring and 40% from the Wolfcamp formation according to recent studies. Eddy County has been the leading drilling and production county in the region since the play began in 2011.

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