Houston-based Copano Energy LLC agreed to acquire Denver-based Cantera Natural Gas LLC from Metalmark Capital for $675 million ($562.5 million in cash and nearly 3.25 million class D units), the company said last week.

Cantera’s assets consist primarily of a 51% managing member interest in Bighorn Gas Gathering LLC and a 37.04% managing member interest in Fort Union Gas Gathering LLC, which operate pipeline systems in Wyoming’s Powder River Basin. The Bighorn system includes approximately 238 miles of gathering pipelines, which deliver gas into the Fort Union system. The Fort Union system consists of an approximately 105-mile, 24-inch diameter pipeline with a 62-mile loop.

A portion of the cash consideration will come from Copano’s $335 million private placement of equity, also announced last week, which will be completed at the closing of the transaction, in addition to the $112.5 million of equity placed with the seller. The balance of the cash consideration will be provided through underwritten debt financing. Copano anticipates closing in the fourth quarter, subject to customary closing conditions including antitrust approval.

“We are extremely pleased to expand Copano’s operations into the Rocky Mountain region,” said Copano CEO John Eckel. He said the deal would give Copano:

“Throughput on Cantera’s systems has been limited by takeaway capacity constraints,” Eckel added. “The current expansion project on the Fort Union system, to be fully completed in early 2008, will more than double its throughput capacity. We expect that this and other takeaway capacity expansion projects will increase 2010 EBITDA [earnings before interest, taxes, depreciation and amortization] from the acquired operations to more than twice current levels. Although this transaction is expected to be nominally accretive to Copano’s stand-alone projections in 2008, we anticipate that it will provide double-digit accretion in 2010 and subsequent years.”

Copano is a midstream natural gas company with gathering, intrastate pipeline and processing assets in Oklahoma and Texas. Metalmark Capital is an independent private equity firm.

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