Enterprise Expands Delaware Basin Footprint with Piñon Midstream Acquisition
Alpha InspirationMonday, Oct 28, 2024 2:56 pm ET
1min readEnterprise Products Partners L.P. (NYSE: EPD) has completed its acquisition of Piñon Midstream, LLC, a significant move that expands its footprint in the eastern flank of the prolific Delaware Basin of Texas and New Mexico. The $950 million cash consideration transaction adds natural gas gathering and treating services to Enterprise's extensive midstream energy portfolio.
The acquired assets include approximately 50 miles of natural gas gathering and redelivery pipelines, five 3-stage compressor stations, and 270 million cubic feet per day (MMcf/d) of existing hydrogen sulfide and carbon dioxide treating facilities, with an expansion to 450 MMcf/d expected by the second half of 2025. Additionally, the assets comprise two of the highest capacity and deepest acid gas injection (AGI) wells in the basin, with plans to evaluate a third injection well supporting up to 750 MMcf/d of total treating capacity.
The acquisition aligns with Enterprise's sustainability goals, as Piñon Midstream's assets include a monitoring, reporting, and verification (MRV) plan for permanent sequestration of carbon dioxide, approved by the Environmental Protection Agency. This approval satisfies a major requirement for 45Q tax credit eligibility, positioning Enterprise to potentially generate additional revenue streams through carbon credits.
The acquisition is expected to generate distributable cash flow accretion of $0.03 per unit in 2025, Enterprise's first full year of ownership, before considering the benefit of any commercial and operating synergies. This transaction is expected to be funded using cash on hand and borrowings under Enterprise's existing commercial paper and bank credit facilities.
The acquisition of Piñon Midstream's assets further strengthens Enterprise's position in the Delaware Basin, providing producers a choice for reliable and value-added processing services. The company's ability to offer comprehensive midstream energy services, combined with its expanded footprint and carbon sequestration capabilities, positions it well to capitalize on future growth opportunities in the region.
The acquired assets include approximately 50 miles of natural gas gathering and redelivery pipelines, five 3-stage compressor stations, and 270 million cubic feet per day (MMcf/d) of existing hydrogen sulfide and carbon dioxide treating facilities, with an expansion to 450 MMcf/d expected by the second half of 2025. Additionally, the assets comprise two of the highest capacity and deepest acid gas injection (AGI) wells in the basin, with plans to evaluate a third injection well supporting up to 750 MMcf/d of total treating capacity.
The acquisition aligns with Enterprise's sustainability goals, as Piñon Midstream's assets include a monitoring, reporting, and verification (MRV) plan for permanent sequestration of carbon dioxide, approved by the Environmental Protection Agency. This approval satisfies a major requirement for 45Q tax credit eligibility, positioning Enterprise to potentially generate additional revenue streams through carbon credits.
The acquisition is expected to generate distributable cash flow accretion of $0.03 per unit in 2025, Enterprise's first full year of ownership, before considering the benefit of any commercial and operating synergies. This transaction is expected to be funded using cash on hand and borrowings under Enterprise's existing commercial paper and bank credit facilities.
The acquisition of Piñon Midstream's assets further strengthens Enterprise's position in the Delaware Basin, providing producers a choice for reliable and value-added processing services. The company's ability to offer comprehensive midstream energy services, combined with its expanded footprint and carbon sequestration capabilities, positions it well to capitalize on future growth opportunities in the region.
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