DENVER—Extraction Oil & Gas Inc. (NASDAQ: XOG) said July 9 that it signed gathering agreements for oil, natural gas and water with Elevation Midstream LLC, a wholly owned subsidiary of Extraction. Elevation has secured financing for the build-out of its system through GSO Capital Partners LP). This financing is non-recourse to Extraction.
Commenting on the transaction, Extraction’s Chairman and CEO Mark Erickson said: “We are extremely pleased to announce this transaction as we believe it is very beneficial to Extraction shareholders. While we will retain the full economic upside from this midstream system, the buildout will be fully financed without any expected cash outlay from Extraction. Once this midstream system is operational, we expect it will enhance our upstream value by driving significant reductions in lease operating expense and well cost, greater product capture and increased flow assurance while maintaining corporate differentials at or below current levels. It provides a potentially large value uplift for Extraction shareholders upon any eventual monetization of our midstream ownership. Additionally, the financing is non-recourse to Extraction which minimizes risk to our shareholders.”
Michael Zawadzki, senior managing director and co-head of energy at GSO said: “We are delighted to partner with Elevation on the construction of the Hawkeye and Southwest Wattenberg midstream systems. These facilities will allow Extraction and other third-party customers to unlock highly attractive development opportunities in the infrastructure constrained southern DJ Basin.”