Noble Midstream Partners LP and Greenfield Midstream LLC formed Black Diamond Gathering LLC, a joint venture that is set to acquire Saddle Butte Rockies Midstream LLC and its affiliates for $625 million.
Assets in the acquisition include a large-scale integrated crude oil gathering system in the DJ Basin. It consists of about 160 miles of operating pipeline, delivery capacity of 300,000 barrels per day and storage capacity of about 210,000 barrels of crude oil. Also included are about 115,000 of Saddle Butte's dedicated acres from six customers under fixed-fee agreements, with about 72,000 dedicated acres from PDC Energy Inc. PDC plans to expand its acreage dedication to about 96,000 acres and to extend its dedication by five years, increasing the total contract duration to about 12 years upon closing of the sale, which is expected in the first quarter of 2018.
Noble Midstream would operate and control the Saddle Butte system and would own 54.4% of the joint venture, funding 50% of the purchase price and receiving a 4.4% ownership promote. Noble Midstream's ownership of the joint venture is to be be held in Laramie River DevCo LP, a wholly owned subsidiary. Greenfield Midstream would own the remaining 45.6% of the joint venture, according to a Dec. 12 news release.
"Saddle Butte is a strategic expansion of our footprint in the DJ Basin, which creates a premier DJ Basin crude gathering system and significantly enhances our third-party customer base," said Terry Gerhart, CEO of Noble Midstream GP LLC. "The expanded crude gathering system and [joint venture] structure provides Noble Midstream flexibility to enhance returns on future capital projects."
Noble Midstream also launched an underwritten public offering of about 3,200,000 common units, according to a separate release Dec. 12. The partnership also intends to give underwriters a 30-day overallotment option for up to 480,000 additional common units.
Proceeds from the offering are planned to be used to help fund the joint venture's acquisition. The proceeds will temporarily be used to reduce borrowings under Noble Midstream's revolving credit facility until proceeds are needed for the acquisition's closing.
Citigroup Global Markets Inc. is acting sole book-running manager for the offering.
