Crestwood buys Sendero Midstream, sells Barnett footprint to EnLink

Crestwood Equity Partners is beefing up its growing Delaware Basin pipeline footprint by acquiring Sendero Midstream Partners for $600 million, while helping to finance the deal by exiting North Texas' Barnett Shale and selling those assets to EnLink Midstream for $275 million.

The two cash deals, announced late May 25, come as part of Crestwood's strategy to aggressively grow in its two core areas in the Permian's Delaware Basin and in North Dakota's Bakken Shale. Recently on Feb. 1, Crestwood closed on its big, $1.1 billion acquisition of Oasis Midstream that greatly expanded its oil and gas size in both the Bakken and Delaware.

The Sendero Midstream assets are primarily natural gas-focused and are entirely located in Eddy County near Carlsbad, New Mexico. The assets comprise 350 MMcf/d of processing capacity, 140 miles of natural gas gathering lines and more than 53,000 horsepower of field-gathering compression. Sendero Midstream was formed in 2014 with private equity-backing from Energy Capital Partners.

Crestwood CEO Bob Phillips said the Sendero assets mesh well with Crestwood's existing Willow Lake pipeline and processing footprint in the Delaware that is part of its Crestwood Permian Holdings joint venture with the private equity firm First Reserve. In order to simplify its structure, Crestwood said it will acquire First Reserve's 50% JV stake for $320 million in stock.

All of the deals are expected to close in the third quarter.

"The acquisition of Sendero Midstream is highly complementary to our existing Willow Lake assets, provides excess processing and compression capacity for current and future customer development activity, and solidifies Crestwood's footprint in the leading North American shale play," Phillips said in a statement.

Due to natural gas takeaway and processing constraints in the Delaware and elsewhere in the Permian, expansion was considered necessary to keep crude oil production growth from being hampered by the large amounts of associated gas that come with the crude volumes.

Barnett Shale

The sale of Crestwood's Barnett assets includes its Alliance, Lake Arlington and Cowtown system, representing a full exit from the Barnett Shale.

The assets include nearly 500 miles of gas-gathering pipelines, 925 MMcf/d of natural gas-gathering capacity, and three processing plants with 425 MMcf/d of capacity, which EnLink said will be available for future relocation.

Crestwood was founded in 2010 based on its Barnett assets, but has increasingly focused on the Bakken and Delaware basins since then. Crestwood also has sought to grow in the Powder River Basin.

"As we close this chapter in Crestwood's history, we will continue to focus on building and optimizing our sizeable gathering and processing positions in the Williston Basin, Delaware Basin, and Powder River Basin," Phillips added. "We believe the strategic actions we are taking today to divest a legacy asset to core up our position in one of the most prolific, economic and active basins in North America best positions Crestwood to deliver long-term value creation for our unitholders."

As for EnLink, CEO Barry Davis said Crestwood's assets would expand EnLink's position in North Texas' Barnett with proximity to existing and planned LNG export facilities along the US Gulf Coast.

"This transaction is consistent with our strategy to execute tuck-in acquisitions adjacent to our existing footprints through which we can generate significant synergies and integrate seamlessly without incremental resources," Davis said. "In addition, EnLink has a proven strategy of redeploying underutilized assets to areas of high growth, thus reducing capital expenditures and achieving significantly better economics than through new build projects, and, when completed, we expect this acquisition to bring a robust set of opportunities for our team to do just that."