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Delaware Basin-focused producer inks crude oil gathering deal with Salt Creek

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Delaware Basin-focused producer inks crude oil gathering deal with Salt Creek

The Texas oil and gas producer Lilis Energy Inc. struck a crude oil gathering agreement with the ARM Energy Holdings LLC affiliate Salt Creek Midstream LLC, which would bring Lilis' oil production to Gulf Coast markets.

Under the agreement, Lilis would use Salt Creek's regional pipeline system for gathering and transportation of oil produced in Texas and New Mexico, delivering the supply to a terminal in Winkler County, Texas. The terminal has access to long-haul downstream pipelines that would carry the oil to Midland, Texas, and the Gulf Coast, according to a May 23 news release.

The agreement includes an area of mutual interest composed of Lilis' acreage in Lea County, New Mexico, and Winkler and Loving counties in Texas. ARM Midstream Management LLC, another affiliate of ARM Energy, would build, manage and operate Salt Creek's pipeline system.

In a separate agreement, Lilis allowed Salt Creek to provide natural gas midstream services for Lilis' gas produced within an area of mutual interest. Salt Creek paid an undisclosed cash consideration for the deal.

The project is expected to begin service in 2019.

Lilis' exploration and production operations are focused in the Permian Basin of West Texas and southeastern New Mexico, particularly in the Delaware Basin. Salt Creek is a full-service midstream provider, a joint venture between ARM Energy and the asset manager Ares Management LP, also operating in the Delaware Basin. ARM Energy is a producer services firm headquartered in Houston.