El Paso Energy Partners LP said Thursday it has received clearance from its board and a special conflicts committee to purchase a range of midstream assets from El Paso Corp. for an estimated $782 million. The crown jewel is El Paso’s vast natural gas gathering network in the San Juan Basin in New Mexico.

The partnership’s board also okayed a 10-cent increase in distribution payable to common unitholders to an annualized rate of $2.70 per common unit, payable in November for the third quarter. This marks the seventh distribution raise in the past two years, representing a 29% hike in total distributions to unitholders, El Paso Energy Partners noted.

El Paso Energy Partners and El Paso said they have entered into a letter of intent for the sale of the assets, which also includes natural gas liquids (NGL) transportation and fractionation assets located in Texas, and an oil and gas gathering system located in the Deepwater Trend of the Gulf of Mexico. The transaction is subject to El Paso Energy Partners receiving Hart-Scott-Rodino antitrust approval and financing satisfactory to the partnership. It said it expects to close the deal during the fourth quarter of this year.

The partnership anticipates the acquired assets will generate an annual EBITDA (earnings before interest, taxes, depreciation and amortization) in the range of $115 to $135 million for 2003. El Paso Energy Partners said it will provide more information about the deal when its reports its second quarter earnings on July 30.

“These new midstream assets are ideal for the partnership because they are strategically located in active supply development areas, are supported by long-term contracts, and offer growth potential,” said El Paso Energy Partners CEO Robert G. Phillips. “We expect to finance this transaction through permanent debt and equity financing in accordance with our strategy to maintain a strong balance sheet.”

The most prominent asset to be acquired is El Paso’s 6,000-mile gas gathering network in the San Juan Basin, which currently gathers more than 1.1 Bcf/d of mostly conventional gas production from over 9,500 wells in the basin. Key producers dedicated to the basin’s gathering system under long-term contracts include Burlington Resources, Conoco and BP. The system delivers about 600 MMcf/d of gas to the partnership’s Chaco gas processing plant, which has an NGL output of more than 40,000 b/d.

Other assets include the 60 MMcf/d Rattlesnake Treating Plant located in San Juan Basin, and a 50% interest in the 250 MMcf/d Coyote Gulch Treating facility in southern Colorado. Both plants extract carbon dioxide from local coal seam gas production. In addition, El Paso Energy Partners will acquire an integrated set of NGL assets stretching from the Mexico border near McAllen, TX, to Houston, including more than 650 miles of pipelines with a capacity of 80,000 b/d, a 24,000 b/d NGL fractionator located in Houston, a truck loading terminal near McAllen, and 13.6 million barrels of underground NGL storage.

Included in the deal as well will be the Typhoon offshore oil and gas gathering pipelines that extend into the Gulf of Mexico Deepwater Trend to ChevronTexaco and BHP-Billiton’s Typhoon discovery in Green Canyon Block 237. The Typhoon oil pipeline currently gathers about 40,000 b/d of production, while the Typhoon gas pipeline gathers over 45 MMcf/d. The Typhoon gas gathering system will be eventually integrated into the partnership’s Marco Polo gas gathering system, which is to be built in 2003 to serve Anadarko Petroleum’s Marco Polo discovery located in Green Canyon Block 608.

El Paso Energy Partners is one of the largest publicly traded master limited partnerships with interests in a diversified set of midstream assets.

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