MarkWest Energy Partners LP and American Central Western Oklahoma Gas Co. LLC. have entered into an agreement under which MarkWest will acquire American Central’s Foss Lake gathering system and Arapaho gas processing assets in Western Oklahoma for approximately $38 million.
Englewood, CO-based MarkWest said it expects the acquisition to generate approximately $5.5-$6 million per year of cash flow from operations and is anticipated to close and be effective on Dec. 1.
Consisting of approximately 167 miles of 20-, 12-, 8-, 6-, and 4-inch pipeline connected to approximately 280 wells, the Foss Lake Gathering System includes approximately 11,000 horsepower of compression and has a capacity of 65 MMcf/d with the ability to expand to 75 MMcf/d. Currently, system throughput is approximately 58 MMcf/d. All of the gas gathered into the Foss Lake system is ultimately compressed and delivered to the Arapaho processing plant.
The Arapaho plant is a reconditioned facility that was upgraded and modernized when installed in early 2000. All of the residue gas from the Arapaho plant is delivered into the Panhandle Eastern Pipeline, while Koch Hydrocarbon LP, purchases all of the natural gas liquids extracted from the plant.
“American Central has done a great job of developing the Foss Lake system and providing high quality gathering and processing services for their customers,” said MarkWest Energy Partners’ President Frank Semple. “We look forward to building on that solid foundation. This acquisition fits very well with our current asset base in Texas and allows us to continue to expand our midstream services. The Anadarko basin has a large remaining reserve potential and should allow the Foss Lake system to continue to grow and provide strong cash flows well into the future.”
Initially the acquisition will be financed using MarkWest’s bank credit facilities. However, the company noted that its ongoing strategy is to reduce an overall debt-to-total capital ratio to a less than 50% level.
Stephen Jackson, CEO of American Central Gas Technologies Inc., the manager of American Central Western Oklahoma Gas Co., said, “This sale of our Western Oklahoma assets is an important part of our strategy to be in a position to take advantage of identified growth opportunities in the industry.” Tulsa, OK-based American Central Gas Technologies Inc. is an independent natural gas gathering operation.
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