Howard Energy Partners to Acquire 185 Miles of South Texas Pipeline from Meritage Midstream Services

abarrelfullabarrelfull wrote on 15 Mar 2012 15:19
Tags: deals eagle-ford howard pipeline usa

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Howard Energy Partners (HEP) announced today that the company has entered into definitive agreements to acquire substantially all of Meritage Midstream Services' natural gas gathering assets in South Texas. HEP will acquire the Eagle Ford Escondido Gathering System, which is partially owned by Laredo Energy, and the Cuervo Creek Gathering System. Both systems are primarily 12-inch to 16-inch high pressure natural gas pipelines. The transaction is expected to close in April, subject to regulatory approvals and customary closing conditions.

The acquisition will be funded primarily with equity investments in HEP by Crosstex Energy, L.P. (NASDAQ: XTEX), Quanta Services, Inc. (NYSE: PWR), GE Energy Financial Services, a division of General Electric (NYSE: GE), and Clear Springs Energy Company LLC. After closing of the acquisition and including initial investments, Crosstex and Quanta will have contributed an aggregate of $87.25 million each to HEP. These two companies, along with GE Energy Financial Services, upon the closing of the acquisition, will each own 30.6 percent of the outstanding units in HEP.

The two systems, located in Webb County, Texas, consist of a newly constructed rich natural gas gathering system with approximately 83 miles of pipeline, a 102-mile lean natural gas gathering system, two leased amine treating plants, and multiple intrastate pipeline outlets for regional processing and transportation. The systems are supported by multiple long-term fee based agreements with more than 180,000 dedicated acres and more than 200 billion cubic feet of total volume commitments. The lean and rich gas pipelines have a combined capacity of 400 million cubic feet of natural gas per day (MMcf/d), of which 80 percent of the firm capacity is under contract. HEP expects to expand the systems in the near term to meet increased demand for natural gas gathering from multiple geologic formations including the Escondido, Olmos, San Miguel, Austin Chalk and Eagle Ford Shale.

Following the closing of the acquisition, HEP will own and operate approximately 450 miles of natural gas gathering pipelines in Webb, Dimmit, Frio, Maverick and Zavala counties in Texas. These systems currently gather more than 175 MMcf/d and have the ability to quickly expand capacity as drilling continues to increase in HEP's area of operation.

"The addition of these strategic assets enhances the value of our position in the prolific South Texas area so that we may continue to provide integrated midstream solutions to our customers," said Brad Bynum, President of Howard Energy Partners. "Adding GE Energy Financial Services to our partnership complements our strengths and allows us the opportunity to accelerate our growth strategy and solidify our position as a total-solutions provider in and around the Eagle Ford Shale. We would like to thank our existing partners for their continued support as we grow this company."

"We developed the Eagle Ford Escondido and Cuervo Creek systems through a key producer midstream partnership with Laredo IV from the ground up in just two years. We are very pleased to realize a strong return for our investors, EnCap Flatrock Midstream and TPH Partners, and look forward to working with the HEP team on a seamless operational transition for our producers," said Meritage President and CEO, Steven B. Huckaby. "Howard Energy will bring additional resources to our producers, expanding opportunities to maximize the wellhead value of their natural gas. I've known Howard Energy's CEO for a long time. Mike Howard and his team are excellent operators who will serve Eagle Ford customers well."

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