Access Midstream Partners completed a major move toward greater diversity as 2012 came to close when it completed its acquisition of the Chesapeake Midstream Development (CMD) natural gas processing, fractionation and natural gas liquids (NGL) pipelines from its former general partner Chesapeake Energy for $2.16 billion.
The agreement brought in assets from the Eagle Ford, Utica and Niobrara that are well-known to executives at Access Midstream, which was previously known as Chesapeake Midstream Partners. “This acquisition allows our very talented midstream organization to remain together,” Mike Stice, Access Midstream’s chief executive, said during a conference call on February 20 to discuss fourth-quarter 2012 earnings.
“A critical aspect of this acquisition was that the assets came with long-term, market-based, cost of service contract structures consistent with the existing assets in our portfolio. This 100% fee-based structure provides protection for capital, inflation, and re-contracting risks, resulting in highly visible and predictable cash flow over the 10 to 20-year contract terms,” he added.
The addition of these assets are expected to result in a total earnings of $800 million to $850 million in 2013 and 2014 for the company as well as $1.6 billion to $1.7 billion in 2013 growth capital. Stice said that much of this growth capital will be utilized in the Eagle Ford and other liquids-rich portions of the country.
The company has 478 wells waiting to be connected to its pipelines with 257 in the Marcellus. Access Midstream anticipates exiting the year with 50 to 60 wells being added in the play. Marcellus wells waiting to be connected are followed by wells in the Eagle Ford at 109 and the Utica at 68.
“As you can imagine, WOPLs (waiting on the pipeline) are being added every day in the liquids-rich plays and they are being declined in any areas where there is dry-gas play. So we are catching up and making progress in the dry-gas areas where there’s WOPL inventory, and we are still being outpaced by the upstream producers in the liquids-rich areas,” Stice said.
The agreement also involved the addition of a new corporate sponsor for Access Midstream as Williams acquired 50% of its general partner along with 34.5 million limited partner units in Access Midstream from Global Infrastructure Partners.
“Williams brings midstream operational and asset development capabilities as well as deep expertise across the midstream value chain, which complement our already strong business. We now have two great sponsors who have substantial commitment to Access and a strong belief in our assets, our business model and our people,” Stice said.
Contact the author, Frank Nieto, at fnieto@hartenergy.com
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