Partnerships Drive Midstream Expansion

Midstream is a hot space to be, as evidenced by new Deloitte LLP statistics. Deloitte’s recently released second-quarter report detailing recent oil and gas mergers and acquistions revealed that midstream deals shot up 70% year-over-year during the first half of 2012. And, if the latest sector transactions are any indication, midstream is showing no signs of slowing down.

More than a dozen acquisitions were announced in July and early August for a total of about $8.5 billion in private and public capital. An approximately equal amount of equity deals were announced worth a total of about $6.2 billion.

In some cases, strategic partnerships were the name of the game as companies entered into joint ventures in an effort to help midstream grow.

Caiman Energy II secured $800 million in equity commitments in a joint venture with Williams Partners LP. The money will be used to build a midstream system in the Utica Shale. It will be invested into developing natural gas, natural gas liquids and crude oil gathering and processing infrastructure. Funds were contributed by Williams Partners, EnCap Flatrock Midstream, Highstar Capital and management. Williams Partners’ anticipated contribution to the development will be about $380 million.

CenterPoint Energy Field Services LLC is expanding its presence in liquids rich Northeast Texas and Northwest Louisiana with the acquisition of $275 million in gas gathering and processing assets. It bought the equipment from Martin Midstream Partners L.P. in a deal that also includes 50% interest in the Waskom Gas Processing Company.

The deal includes the Woodlawn gas processing plant and gathering system, the McLeod, Hallsville and Darco gas gathering systems and the East Texas condensate gathering system.

During a June 19 conference call, Martin Midstream CEO Ruben Martin told analysts and investors that his company parted with the assets after much consideration. The move was made to simplify the company’s business mix.

It now plans to put more focus on the expansion of its feebased core operating assets, while reducing its exposure to nonfee based cash flow and commodity prices.

Martin Midstream will use sale proceeds to repay outstanding debt on revolving credit, so that it can improve its balance sheet and position itself for future growth.

Meantime, EQT Midstream Partners LP raised $262.5 million after releasing 12.5 million common units at $21 each. Common units began trading June 26 and the offering closed July 2. It was the first company to launch an initial public offering (IPO) in a month, following the disappointing Facebook IPO.