Tallgrass Midstream LLC closed its acquisition of Outrigger Energy LLC's crude oil-gathering system in the Powder River Basin for about $36 million.
Under the deal, the Tallgrass Energy Partners LP subsidiary purchased about 34 miles of gathering lines and about 150,000 acres dedicated on a long-term, fee-based contract, according to an Aug. 7 news release.
Tallgrass expects to spend about $7 million in additional CapEx on the Outrigger system for the rest of 2017. In connection to the deal, Tallgrass Interstate Gas Transmission LLC plans to abandon an underutilized segment of its system by selling it to Tallgrass Midstream, pending approval from the Federal Energy Regulatory Commission.
Tallgrass Midstream will then convert the segment, which runs from Labonte, Wyo., to Guernsey, Wyo., into crude oil service and add facilities for a new crude oil line from Labonte to the Outrigger system, along with additional laterals into other producing areas in the Powder River Basin. Through the new line, producers will have access on the Outrigger system to Tallgrass Pony Express Pipeline LLC's crude pipeline system.
"With the early, but very encouraging, well results from producers, the Powder River Basin is a strategic focus for Tallgrass," said Bill Moler, COO of Tallgrass.
In addition, Tallgrass appointed Dean Dick to lead its crude oil-gathering business under Tallgrass Midstream. Dick previously held positions at Marathon Petroleum Corp. and Kinder Morgan Inc.