Crestwood Equity Partners has taken full ownership in US midstream firm Jackalope Gas Gathering Services from its joint venture partner Williams in a deal worth around $485m.
The Jackalope Gas Gathering Services operates a gathering and processing system located in the Powder River Basin in Wyoming.
Spread across the Converse County, the midstream asset offers gathering, compression and processing services. It comprises the Jackalope Gas Gathering System and the Bucking Horse Processing Plant.
The midstream asset is underpinned by a 358,000 acreage dedication by Chesapeake and also a 30,000 acreage dedication by Panther Energy.
Crestwood has acquired the remaining stake of 50% in the midstream assets through its affiliate Crestwood Niobrara. Previously, the company held a stake of 50%, which it acquired from RKI Exploration & Production for about $108m in 2013.
Prior to the transaction, Williams was the operator and was responsible for construction and operations, while Crestwood served as marketer by handling commercial services of the asset. Following the transaction, the private equity firm has taken over operatorship of Jackalope.
Williams expects to use the cash proceeds from the deal along with about the allocated $90m investment in the midstream asset to fund its portfolio of growth capital and debt reduction.
Williams president and CEO Alan Armstrong said: “We continue to optimize our portfolio to improve our credit metrics while maintaining the growth embedded in our guidance.
“This win-win transaction frees up capital that we can re-deploy into high-return assets that are better linked to our strategy, while providing Crestwood with the entire ownership of an asset that is key to their Powder River Basin strategy. We’ve been pleased with our partnership with Crestwood and know that employees who move from Williams to Crestwood will continue operating these assets safely and reliably.”
Crestwood said that the acquisition of Williams’ stake is a continuation of its strategy to grow its operational presence in its core growth basins. The company believes that consolidating the Jackalope assets places it for long-term growth in the Powder River Basin by supporting Chesapeake Energy’s and other producer customers’ long-term development plans.
Currently, the Bucking Horse and Jackalope assets are going through expansion projects to boost their gathering and processing capacity to 345 MMcf/d. The expansion projects, including line looping and system compression, are slated to be completed by a significant extent in the first quarter 2020.
Crestwood chairman, president and CEO Robert Phillips said: “By already owning 50% of the Jackalope system, our teams have an in-depth understanding of the economics of the Powder River Basin, the development plans and corresponding capital requirements for our existing and prospective customers, and the long-term prospects for future growth on and around our Jackalope system, all of which uniquely positioned Crestwood to capitalize on this opportunity.”