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Billions in deals to end the 3rd quarter

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Billions in deals to end the 3rd quarter

A weekly recap of SNLEnergy's coverage of major themes in the natural gas industry.

Ahost of companies in the oil and gas industry wrapped up the third quarter withM&A announcements as they look for ways to expand footprints, capitalize onstrengths, maximize cash flows or just simplify.

Theheadline deals in the past week centered on taking advantage of prolificAppalachian shale plays. to buy and Vantage EnergyII LLC for about $2.7 billion, vaulting it into the top ranks of the region'sindependent drillers.

Thedeal includes about 85,000 net core Marcellus Shale acres in Greene County,Pa., rights to the deeper Utica Shale on about 52,000 net acres, and 37,000 netacres in the Barnett Shale, Rice said in a Sept. 26 news release. The assetsproduced 399 MMcfe/d in the second quarter, Rice said, with almost two-thirdsin Appalachia and the rest in the Barnett.

Rice Energy will use its own Rice Midstream Partners LPaffiliate to gather and process all those flows, executives said on a Sept. 27conference call todiscuss the deal. "Combining our two positions significantlyincreases the size and scale of our Appalachian leasehold by 55% and nearlydoubles our inventory of Marcellus drilling locations that generate single-wellreturns of 110% at strip pricing with 50-cent [drilling and completion] costsper Mcf," CEO Daniel Rice IV told analysts.

Alsoon Sept. 26, the diversified utility company DTE Energy Co. announced multiple midstream gasassets in the Appalachian Basin from M3 Midstream and Vega Energy Partners forabout $1.3 billion.

TheDetroit-based company said it will purchase the Appalachia Gathering System inPennsylvania and West Virginia and 40% of the Stonewall Gas Gathering system inWest Virginia from M3. DTE would buy an additional 15% of the Stonewall systemfrom Vega when the deals close in the fourth quarter.

DTEwould fold the new midstream assets into its non-utility gas storage and pipelinebusiness.

Liquids deals

struck a deal toacquire Vitol Group'sPermian Basin crude oil system for about $760 million plus working capital.

Expectedto close in the fourth quarter, the acquisition includes a 2 million-barrelcrude terminal in Midland, Texas; a crude gathering and mainline pipelinesystem in the Midland Basin; crude oil inventories related to Vitol's crude oilpurchasing and marketing business in West Texas; and the remaining 50% interestin SunVit Pipeline LLC, according to a Sept. 26 news release. The SunVitpipeline links the Midland terminal to the partnership's Permian Express 2 pipeline.

"Theaddition of the Vitol system is an excellent synergistic fit to our growingcrude platform in the Permian Basin," Sunoco President and CEO MichaelHennigan said in a statement. "The Vitol pipeline assets are located inwhat we believe are the three best counties in the Midland Basin."

OnSept. 29, an Enbridge Income FundHoldings Inc. affiliate agreed to sell its liquid pipelines assets in the SouthPrairie region in Saskatchewan and Manitoba to Tundra Energy Marketing Ltd. forC$1.08 billion.

Theassets for sale are Enbridge's liquid pipelines and facilities in southeastSaskatchewan and southwest Manitoba, including the Saskatchewan and Weyburngathering systems and the Westspur trunk line, according to a Sept. 29 newsrelease by Enbridge Inc.

"Themonetization of these non-core assets at an attractive valuation provides alow-cost funding source for the Enbridge group and further supports EnbridgeInc.'s industry leading cash flow and dividend growth outlook from our securedorganic growth platform," Enbridge Executive Vice President and CFO JohnWhelen said.

Corporate simplification

Theweek's announced deals were not limited to hard assets changing hands.Cheniere Energy Inc.on Sept. 30 proposed tobuy all of CheniereEnergy Partners LP Holdings LLC's shares it does not already own ina stock-for-stock deal valued at $1.01 billion.

Underthe merger proposal, Cheniere would issue 0.5049 share for each outstandingunit of Cheniere Partners Holdings. The consideration represents a premium ofabout 3% over both entities' closing price as of Sept. 29, according to a Sept.30 news release.

Thedeal works to simplify Cheniere's overall structure, said Pavel Molchanov, ananalyst at Raymond James & Associates Inc. "[Cheniere PartnersHoldings] in the eyes of many investors was somewhat of a uselesscomplication," Molchanov said. "Getting rid of it is a paper exercise… it just makes the story more streamlined."

subsidiaryColumbia Pipeline GroupInc. made anoffer to acquire Columbia Pipeline Partners LP in an all-cash deal valuedat about $848.0 million, or $15.75 per unit.

Theoffer price represents an 11.3% premium to the 30-day average closing priceSept. 23, according to a Sept. 26 news release. The move follows TransCanada'sJuly 1 announcementthat it was reviewing its strategic alternatives for its master limitedpartnership holdings.

MLP drop-downs

agreed to acquire anadditional 20% equity interest in Mars Oil Pipeline Co. and a 49% equityinterest in Odyssey PipelineLLC from parent RoyalDutch Shell plc for $350 million.

The600,000-barrel-per-day Mars Oil Pipeline delivers crude from the Mars Basin andthe Amberjack system into LOOP's Clovelly facility. Meanwhile, Odyssey has220,000 bbl/d of capacity that transports from the eastern Gulf of Mexico tothe Delta Pipeline system, enabling deliveries to refineries in Louisiana andMississippi.

"BothMars and Odyssey build on our key corridor pipeline strategy in the Gulf ofMexico and are advantageously positioned to continue to capture growth ofoffshore volumes along our footprint of assets," Shell Midstream CEO JohnHollowell said in a statement.