Increasing its natural gas gathering and processing footprint in the U.S. Midcontinent and Gulf Coast, Houston-based Enbridge Energy Partners LP (EEP) has signed a definitive purchase agreement to acquire gathering and processing assets in North Texas from Cantera Resources Inc., an affiliate of Morgan Stanley Capital Partners.
The company anticipates that the $247 million in cash acquisition will close by the end of 2003, subject to customary closing conditions including regulatory approvals. Upon completion, the facilities will be renamed the North Texas System.
The system primarily serves the Fort Worth Basin, including growing production from the Barnett Shale zone. Current gas throughput on the system averages approximately 170 MMcf/d. EEP noted that the facilities include more than 2,000 miles of gas gathering pipeline and five active processing plants with aggregate capacity of 217 MMcf/d.
Stating that the acquisition furthers one of Enbridge Partners’ key strategic thrusts, Dan C. Tutcher, president of the partnership’s management company and general partner, said, “We are particularly pleased to be adding assets with access to the prolific Barnett Shale gas play to the partnership’s portfolio, as this should benefit us in two ways. First, we expect the North Texas acquisition will be immediately accretive to the partnership’s distributable cash flow and should provide modest growth over the next several years. Second, we believe that local markets for Fort Worth Basin production are nearing saturation and additional market outlets will be required.
“The partnership’s proposed new East Texas System transmission line provides a logical alternative to deliver into the major Carthage, TX natural gas hub, if suitable interconnections are developed between the North and East Texas Systems,” Tutcher added.
EEP said that the North Texas System derives the majority of its revenues from the sharing of sales proceeds of natural gas and natural gas liquids under contracts with natural gas producers. The company added that the direct commodity price exposure inherent in such contracts will be “suitably mitigated” through a hedging strategy.
Following news of the acquisition, Standard & Poor’s Ratings Services (S&P) said Enbridge Energy Partners LP’s rating or outlook (BBB+/Negative/–) would not be affected.
“The acquired assets complement EEP’s existing natural gas pipeline and gathering assets in East Texas and serve to extend EEP’s operations in the region,” S&P said. “In addition, the purchase price, which represents about eight times the expected [earnings before interest, taxes, depreciation, and amortization] is in line with recent prices paid for similar assets.”
The rating agency added that it does not expect the financing of this acquisition to stall EEP’s efforts to strengthen the master limited partnership’s cash flow protection measures and improve its financial profile.
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