Atlas Pipeline Partners LP last week acquired control of Anadarko Petroleum Corp.’s interests in the Chaney Dell and Midkiff-Benedum gas gathering and processing systems for $1.85 billion, subject to adjustments.
The deal was announced in June (see NGI, June 11).
Atlas Pipeline Partners, a unit of Atlas Pipeline Holdings LP, said Friday it is entitled to all income from and responsible for all property costs incurred by both systems retroactive to July 1. Atlas Holdings expects to distribute between 58 and 65 cents/common unit for the second half of 2007, and between $1.60 and $1.80/common unit in 2008.
Additionally, Atlas Pipeline Mid-Continent WestTex LLC, a subsidiary of Atlas Pipeline Partners, has reached an agreement with Pioneer Natural Resources Co., which currently holds an approximate 27% interest in the Midkiff-Benedum system, regarding Pioneer’s preferential right to purchase Anadarko’s interest in the system (see related story).
The parties will extend the term of Pioneer’s percentage of proceeds (POP) contract for gas processed by the Midkiff-Benedum system for an additional 10 years through 2022. During 2006, the system processed more than 138 MMcf/d, a majority of which was supplied by Pioneer. The agreement also allows for incremental annual increases in Pioneer’s POP beginning in 2009.
Pioneer will have an option to buy up to an additional 14.5% interest in the Midkiff-Benedum system one year after the closing, and up to an additional 7.5% interest two years after the closing. If the option is fully exercised, Pioneer would increase its interest in the system to approximately 49%. Pioneer would pay approximately $230 million for the additional 22% interest if fully exercised.
Atlas Pipeline Partners will manage and control the Midkiff-Benedum system regardless of whether Pioneer exercises the purchase options.
Atlas Pipeline Partners partially financed the acquisition through a private placement of $1.125 billion of its common units, of which approximately $168 million of common units, or 3.8 million Atlas Pipeline Partners common units, were purchased by Atlas Holdings. Atlas Holdings financed the purchase of the Atlas Pipeline Partners units through its own private placement of 6.25 million of its common units generating total proceeds of approximately $168 million. In order to maintain its 2% general partner interest in Atlas Pipeline Partners, Atlas Holdings contributed approximately $23 million to the partnership, which it funded with an advance against its existing $50 million credit facility that matures in 2010.
The Chaney Dell system is located in northwest Oklahoma and southern Kansas, near the center of the Anadarko Basin. Throughput on the system averaged 226 MMcf/d in 2006, and is centered within an active drilling area. This system consists of two active processing facilities:
The Midkiff-Benedum system, which is approximately 73% owned by Atlas Pipeline Partners, is located in the Spraberry Trend of the Permian Basin, near Midland, TX. In 2006, the Midkiff-Benedum system had approximately 139 MMcf/d of average throughput. This system consists of:
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