Nuevo Midstream’s operations are focused in the Delaware basin where the company has established a gathering and processing footprint that covers more than 2,500 square miles and serves more than 45 oil and gas producers. Today, Nuevo is supported by approximately $308 million in private equity commitments from EnCap Flatrock Midstream, Wells Fargo Energy Capital and management. Nuevo launched with $65 million in equity commitments in April 2011.

Here, Nuevo’s Chief Executive Jay Lendrum reflects on the company’s success as well as the state of the midstream industry. Lendrum served as Torch Energy Advisor Inc.’s president and chief executive prior to taking on his current role. He is Torch Energy Advisors’ board chairman, serves on the board of directors for BPZ Energy and is vice chairman of Resaca Exploitation Inc. He graduated from The University of Texas with a finance degree and went on to earn a graduate degree in accounting theory.

MIDSTREAM How did you begin your career in the energy industry?

LENDRUM I’m from Midland [Texas] and that means I was born into the business. I got started on the financial side, and it grew from there. My professional background is in accounting. I’m a CPA. After getting certified, I joined a firm now called KPMG Peat Marwick in Midland and focused entirely on the energy business. I spent seven years with Peat Marwick, and then I joined a client in Midland who had some relationships in Houston. In the mid-’80s I joined one of our investor companies, which ended up becoming part of Torch Energy.

MIDSTREAM You’ve been in the energy industry for almost four decades. What’s been your career highlight?

LENDRUM In recent years, the highlight has been forming Nuevo Midstream. It’s something I’ve been involved with from day one and I’m really proud of what we’ve done. Before Nuevo, I did a lot of capital formation and helped put companies together, but there is a lot to be said for what we’re doing right now. I feel very good about how the company has evolved and the overall trajectory of the midstream business. This is a crowning event for me.

MIDSTREAM Has there been a low point for you as well?

LENDRUM Oh yes, in 1985-86 when the price of oil was down to $15 or $20 a barrel. They were tough times, but that’s the cycle we live in. Gas prices have been up and down several times. But oil prices were down, and the problem with oil prices being down is that you can’t drill. It has an impact on people, your employees, your friends and associates and even your own family. The downturn in the oil business back in the ’80s was probably the most difficult part of my career.

MIDSTREAM What attracted you to start this new company?

LENDRUM It was a tremendous opportunity, and we saw that we could bring in our capital partners, EnCap Flatrock and Wells Fargo, to build the system out and get the whole thing going. That’s what really attracted us.

MIDSTREAM When Nuevo first began, what advantages did it have as a private startup above the well-established industry giants?

LENDRUM The industry giants you referred to are primarily the offshoots from the major companies or the master limited partnerships (MLPs). Both of these types of organizations really have to respond and report on a current cash flow and current-earnings basis. We have a tremendous situation because we’re basically a greenfield developer. We’re a lot more flexible, we can move a lot quicker, and we can be a lot more responsive to our. We went out and identified a project, brought in some capital partners and put the capital in to really develop a very large gathering and processing footprint in the Delaware basin. We did it very quickly, and we’re continuing to expand. The advantage we have is that we aren’t driven by the quarter-to-quarter earnings calendar that really controls other kinds of businesses.

MIDSTREAM Nuevo has grown tremendously in the past few years. How was this accomplished?

LENDRUM It’s the support of our capital partners, and it’s the support of our producers. It’s the producers in the field who believed in our integrity and believed we were going to get out there and get something done. That’s the key. Producers gave us the opportunity to go out, put in these systems and really build them out.

MIDSTREAM Does the company have plans to sell or go public?

LENDRUM I can’t say that we have plans to do either one. All companies are structured in a similar way evaluate various exit strategies at some point. You build it up, you bring in capital partners and ultimately you might think about bringing in a partner and taking it public. I would welcome that opportunity. This could happen in the future, but there are no plans for this now. Right now all of our attention is focused on building our business by being the best and most responsive midstream provider in the Delaware basin.

MIDSTREAM You’ve called the Delaware basin, where Nuevo focuses its operations, one of the most important producing basins in the world. Why do you feel this way?

LENDRUM I understated that when I said it. The reality is, it is a huge basin, and it is turning out to be a tremendous opportunity. You can look at the published literature by the public E&P companies, and they are seeing eight or nine producing horizons that all have potential. We’re seeing a reincarnation of the western side of the Permian basin.

MIDSTREAM What is Nuevo’s growth strategy?

LENDRUM We started out two years ago with a small 10-million-cubic-feet (MMcf) per day cryogenic plant that had not be operational for a number of years. We have since refurbished and expanded that plant, and we brought in another 100-MMcf-per-day plant. We brought in three levels of amine treating, and we will be up to 2,000 gallons per minute of amine treating— which is a significant amount—in July. We’ve got another 200-MMcf-per-day plant on order that’s being fabricated as we speak. It’s scheduled to be delivered in October and will be up and operational the first quarter of next year. We’ve laid out a significant amount of pipeline infrastructure as well. The footprint of our existing pipeline system covers about 2,500 square miles. We’re continuing to grow that in three basic directions: north, south and northeast. If certain contracts come together that we’re in discussions about, I anticipate putting in another order for another 200-MMcf-per-day plant, which would be delivered in the fall of 2014. That’s our growth pattern. We have a great area to work in with good customers and producing companies that are supporting us. We have good infrastructure out there, and we are going to grow that area and serve as many producers as we can.

MIDSTREAM How do you see the midstream world evolving in coming years?

LENDRUM The reality is that we’ve got a great model to go out, establish production and move toward domestic energy independence. But you still have to have the ability to take away the crude oil, the natural gas, process the natural gas, get those liquids into pipelines and get everything going into the proper market. We think of it as a pipeline scenario, though what is evolving more and more is an aggressive railroad operation. We’re seeing that with trucking as well. It’s a service business, it’s going to really expand, and I think it’s very significant. All of these shale plays, for the most part, have a large liquids component and those liquids have to be processed. I think it’s going to be very positive for us.

MIDSTREAM Through your involvement as a board member for other companies, such as Torch Midstream and BPZ Energy, you’re keeping tabs on a number of other basins throughout the U.S. and South America. Is there any area you’re particularly excited about?

LENDRUM Of course, I would like to say the U.S.; there’s no question about that. With that being said, the areas that have evolved are the shale plays. Some shale plays, from an age standpoint, are prevalent in South America and Asia. If you look at the history of the energy business, the U.S. has been the leader in developing technology and engineering techniques. I think we’ll have a transfer of that knowledge to the other basins. I like what I see here in this country, but at the same time, I think there is incredible potential to duplicate what we’re doing in North America in certain basins in South America and Asia.

MIDSTREAM With all of your experience, are there any words of wisdom you would look to impart on the next generation of midstream executives?

LENDRUM Go to the field. Don’t sit in Houston or Dallas and just look at the screen. Go to the field, talk to the people who work for you out there and understand what’s going on. That’s what I would tell any up-and-comer who wants to get in the energy or midstream business. You have to understand what’s really happening out in the field. If you do that, you’ll have a much better feel for what you’re doing and what the potential for this industry truly is.