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Enterprise Products to Buy Natural Gas Assets from Midstream

Enterprise Products To Buy Natural Gas Assets From M2 Midstream For $1.2 Bln - Update

 

Posted on: Thu, 01 Apr 2010 10:08:00 EDT


Symbols: EPE, EPD, EPB

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Check for a PowerRating from TradingMarkets (RTTNews) - Enterprise Products Partners L.P. ( EPD | Quote | Chart | News | PowerRating), a midstream energy company, said Thursday that it has agreed to purchase two natural gas gathering and treating systems from M2 Midstream LLC

for about $1.2 billion.

The transaction for the State Line system and the Fairplay system is expected to close in early May 2010 and be accretive to Enterprise's distributable cash flow in the second half of 2010.

The systems are located in Northwest Louisiana and East Texas, and gather natural gas produced from the Haynesville/Bossier Shales and the Cotton Valley and Taylor Sands formations. The company noted that both the systems are supported by long-term acreage dedications and volumetric commitments from producers.

Mergers and acquisitions in the energy sector have intensified amid a rush to drill for natural gas from shale. The relative stability in commodity prices and shales' new found popularity are seen as spurring deals in the natural gas industry.

In late February, Enterprise Products announced the completion of its $3.3 billion merger with TEPPCO partners, L.P., an energy logistics partnership. With an enterprise value of about $30 billion, 48,000 miles of pipelines and market capitalization of $18 billion, the combined entity has become the nation's largest publicly traded partnership. Enterprise plans to expand its crude-oil and refined-products business as a result of the deal.

According to Enterprise Products, the two natural gas systems that it has agreed to acquire complement its downstream assets and provide multiple opportunities for synergies, including a long-term gathering conduit for the company's Haynesville Extension pipeline and Enterprise Texas pipeline, as well as natural gas liquid or NGL volumes for the company's Panola pipeline and downstream Mont Belviue fractionation, storage and distribution complex.

The State Line system, which commenced operations in February 2009, is located in Desoto and Caddo Parishes, Louisiana and Panola County, Texas. The system includes 138 miles of natural gas pipelines with a capacity of approximately 400 million cubic feet per day or Mmcfd, and two treating facilities. The system, currently gathering about 260 Mmcfd, will almost triple its capacity to 700 MMcfd after a 50-mile expansion of the system that is expected to be completed in June 2010.

The State Line system will interconnect with the 42-inch Haynesville Extension of Enterprise's Acadian natural gas pipeline system. The Haynesville Extension, currently under construction, is expected to be completed in the third quarter of 2011. Enterprise noted that the State Line system, once connected to the Haynesville Extension, can be further expanded to 1.2 billion cubic feet per day for a nominal cost.

In late 2008, M2 Midstream initiated the State Line Gathering System, a greenfield project, to serve the Haynesville Shale play in DeSoto Parish, Louisiana. During 2009, the company added over 90 miles of pipeline to the system and three processing plants.

The Fairplay system, located in Rusk, Panola, Gregg and Nacogdoches counties in Texas, includes 249 miles of natural gas pipelines. This includes about 62 miles leased from third parties, with a capacity of approximately 285 MMcfd, and is currently gathering approximately 180 MMcfd. This system is expected to be connected to the Enterprise Texas Pipeline system by the first quarter of 2011.

The Fairplay system was acquired by M2 Midstream in December 2007 and commenced a significant capital improvement and expansion during 2008.

Michael Creel, Enterprise president and chief executive officer said, "We are excited about this transaction with Momentum, which accelerates our entry into the Haynesville/Bossier Shale Play and substantially increases our footprint in the area. This purchase offers producers on the State Line system an alternative to the takeaway pipelines going to Perryville as a result of our planned connection to the Haynesville Extension which provides producers with an outlet to markets in South Louisiana and interstate pipelines that serve natural gas markets in the Southeast United States."

Enterprise Products Partners L.P. is managed by its general partner, Enterprise Products GP LLC, which is wholly owned by Enterprise GP Holdings L.P. ( EPE | Quote | Chart | News | PowerRating). Enterprise's assets include 48,700 miles of onshore and offshore pipelines and approximately 190 million barrels of storage capacity for NGLs, refined products and crude oil, in addition to 27 billion cubic feet of natural gas storage capacity.

In early February, Enterprise Products Partners reported a 78% increase in profit for the fourth quarter from the prior-year period, aided by higher revenues and a favorable impact from one-time items. Net income attributable to the company for the fourth quarter was $406.1 million or $0.60 per unit, up from $228 million or $0.43 per unit a year ago. Revenues for the quarter surged 41.7% to $8.40 billion from $5.93 billion in the year-ago quarter, primarily driven by an increase in sales volumes and energy prices.

During the fourth quarter, volumes of NGL, crude oil, refined products and petrochemical pipeline rose 15% to 4.3 million barrels per day. Total natural gas pipeline volumes during the quarter were 11.5 trillion British thermal units per day, or TBtud, up 2% from the same period of the prior year.



Among Enterprise Products' peers, El Paso Pipeline Partners L.P. ( EPB | Quote | Chart | News | PowerRating) said in late March that it agreed to acquire a 51% interest in both Southern Co., LLC. and El Paso Elba Express Co., LLC. from El Paso Corp. (EP) for $810 million. The acquisition, which is said to be the partnership's largest to date, would broaden its asset base with two high-quality assets. Upon completion, El Paso Pipeline Partners would become the majority owner in Southern LNG's Elba Island liquefied natural gas terminal and El Paso Elba Express' pipeline which went into service on March 1, 2010.

In Thursday's regular trading session, EPD is trading at $35.04, up $0.46 or 1.33% on a volume of 0.18 million shares. In the past 52 weeks, the stock has been trading in a range of $21.10-$34.69.

For comments and feedback: contact editorial@rttnews.com

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