he EnLink Midstream companies, EnLink Midstream Partners, LP (the Partnership) and EnLink Midstream, LLC (the General Partner) (together EnLink), have announced that the Partnership signed a definitive agreement to acquire Coronado Midstream Holdings LLC , which owns natural gas gathering and processing facilities in the Permian Basin, for approximately US$600 million, subject to certain adjustments.
Coronado operates three cryogenic gas processing plants and a gas gathering system in the North Midland Basin including approximately 270 miles of gathering pipelines, 175 million ft3/d of processing capacity and 35 000 horsepower of compression. Construction of an additional 100 million ft3/d of processing capacity and gathering system expansions of the Coronado system are currently underway. Coronado's key assets have been constructed within the past five years and the system has current inlet volumes of approximately 100 million ft3/d. EnLink plans to connect the Coronado system with its Bearkat system to create a multi-county rich gas gathering and processing system to create optimisation opportunities for its customers and its product marketing services.
The owners of Coronado will receive US$240 million in cash, US$180 million of Partnership common units and US$180 million of a new class of Partnership common units, subject to certain adjustments. The Partnership will be able to pay distributions on the new class of Partnership common units in cash or in additional common units of such new class, at the Partnership海角吃瓜网檚 election. The new class of Partnership common units will be entitled to receive distributions equal to those paid on the Partnership common units currently outstanding. After five quarters of distributions have been paid following the closing of the transaction, or earlier at the Partnership海角吃瓜网檚 election, the new class of common units will convert into the same class of common units that are currently outstanding.
The Coronado system is underpinned by long-term contracts, which include the dedication of production from over 190 000 acres. Coronado海角吃瓜网檚 key producer customers include Reliance Energy, Inc. (Reliance), Diamondback Energy, Inc. (Diamondback), and RSP Permian, Inc. (RSP Permian). Reliance is currently the largest owner of Coronado, with affiliates of both Diamondback and RSP Permian owning the remainder of Coronado.
海角吃瓜网淭his transaction builds on EnLink海角吃瓜网檚 growing midstream platform in West Texas,海角吃瓜网� said Barry E. Davis, EnLink President and Chief Executive Officer. 海角吃瓜网淭he Coronado assets are located in the core of the North Midland Basin and are supported by the region海角吃瓜网檚 most focused and active producers. By combining Coronado with our recent LPC acquisition and our existing footprint, we have the opportunity to create tremendous value for our producer customers by linking our gas gathering, processing and crude oil logistics operations to provide a full-service midstream solution.海角吃瓜网�
海角吃瓜网淚n just over four months, we have announced approximately $1 billion of acquisitions, which is consistent with our growth strategy to expand our platform in key producing areas,海角吃瓜网� Davis said. 海角吃瓜网淓nLink is a strong vehicle for sustainable growth, due in large part to our current financial position, which allows us to effectively expand in times like these.海角吃瓜网�
Economics in the North Midland Basin are among the most favourable of all oil-producing regions in the United States. The region has seen a rapid transition to horizontal drilling, with producers targeting the Lower Spraberry, Wolfcamp B, and Wolfcamp D zones among other prospective intervals. Recent well results from Coronado海角吃瓜网檚 producer customers, as well as other producers, indicate outstanding resource potential in the area.
海角吃瓜网淲e have assembled a strong acreage position in the North Midland Basin that will continue to serve as a key driver of production growth for many years,海角吃瓜网� said Travis D. Stice, Chief Executive Officer of Diamondback and Viper Energy Partners. 海角吃瓜网淲e are excited about the development potential for multiple horizontal targets within the area that has and will continue to serve the Coronado system in the future. We have been involved with Coronado since its formation and grown together as business partners. We look forward to working together with its new owners to support each other海角吃瓜网檚 growth aspirations.海角吃瓜网�
海角吃瓜网淩eliance has been focused on expanding and de-risking its acreage around the Coronado system since 2007,海角吃瓜网� said Gary D. McKinney, President of Reliance. 海角吃瓜网淲e believe we are located in some of the best areas of the Midland basin and we海角吃瓜网檙e excited about our recent horizontal well results in the region.海角吃瓜网�
海角吃瓜网淩SP Permian has built a premier acreage position in the Northern Midland Basin that will continue to serve as a cornerstone to our strong production growth and attractive rates of return,海角吃瓜网� said Steve Gray, Chief Executive Officer of RSP Permian. 海角吃瓜网淲e have relied on Coronado throughout our development and look forward to working with its new owners in the future.海角吃瓜网�
EnLink expects the acquisition of Coronado to be neutral to distributable cash flow per unit at both the Partnership and the General Partner in the near-term given the current market environment and taking into consideration the producers海角吃瓜网� current drilling plans. Over the next few years, EnLink expects increased activity around Coronado海角吃瓜网檚 system will generate significant accretion in distributable cash flow per unit. EnLink expects its total investment will be approximately seven to eight times Coronado海角吃瓜网檚 adjusted EBITDA with the timing dependent on the recovery of commodity prices and an increase in producer activity, taking into consideration expected additional capital investments of US$400 million to US$600 million. This does not include synergies with EnLink海角吃瓜网檚 existing Permian assets and the potential for expansion of the combined systems by securing new customers or additional dedicated acreage.
Adapted from press release by