Blue Mountain Midstream LLC secured an agreement with Gaedeke Merge LP to dedicate about 7,200 acres in Oklahoma's Merge oil play to the Chisholm Trail gas gathering and processing system.
Under the agreement, all current and future natural gas production from the acreage would be dedicated to Chisholm Trail, supporting its operations for a primary term of 10 years, according to a Dec. 27 news release. The acreage is in Grady and Canadian counties in Oklahoma. First volumes from the agreement are expected to come in the first quarter of 2018.
The agreement with Gaedeke is expected to add 10 wells to the system in 2018 and expand its dedicated acreage by about 10%.
The Chisholm Trail system in the Merge/SCOOP/STACK play provides gas gathering, compression and processing services through about 30 miles of gas gathering pipeline, a 60 MMcf/d refrigeration facility and access to offload another 20 MMcf/d. Blue Mountain, a LINN Energy Inc. subsidiary, is also building a new cryogenic gas processing system that would have a total capacity of 250 MMcf/d, scheduled for commissioning in the second quarter of 2018.
"With more than 80,000 net acres in the core of the Merge now dedicated to Chisholm Trail and our new 250 MMcf/d cryogenic plant being commissioned in the second quarter of 2018, we believe Blue Mountain is well-positioned to succeed as a standalone midstream company," said Mark Ellis, president and CEO of Blue Mountain.
LINN Energy previously announced a strategic plan involving its separation into three standalone companies, one being Blue Mountain. Upon the separation, Blue Mountain would have its own management team, an independent capital structure and strategic investments, and a separate public listing.