Sept. 28–Two private equity firms are making deals with Houston pipeline companies as more money flows into the booming sector.
The Sugar Land company Lotus Midstream, backed by the San Antonio private equity firm EnCap Flatrock Midstream, plans to join Exxon Mobil and Houston’s Plains All American to construct a multibillion-dollar crude oil pipeline system from West Texas to Houston and Beaumont. Meanwhile, the Boston-based private equity firm ArcLight Capital said Friday it plans to buy out the Houston pipeline company American Midstream Partners and take it private.
The burst of activity in the pipeline sectors is largely driven by the record crude and natural gas production in the Permian Basin in West Texas and the shortage of pipeline capacity to move it all to refining and export hubs the Houston and Corpus Christi areas. Private equity money is flowing to both long-haul pipelines that traverse the state and the regional systems that feed them.
American Midstream Partners owns some of those regional systems. ArcLight, which holds a nearly 25 percent share, said it would acquire the units of the company that it doesn’t already own, paying $6.10 per unit, a 6 percent premium from its closing price Thursday. The firm, however, traded at $14 a unit at the beginning of the year. The deal would value American Midstream at nearly $330 million
Lotus, which was formed at the beginning of this year, made waves just a month ago when it agreed to buy a Texas pipeline system from the Houston oil company Occidental Petroleum. The Centurion pipeline system extends from the Permian to the Cushing, Okla. oil storage and transportation hub.
Lotus is planning to create a formal joint venture soon with Exxon Mobil, headquartered in Irving, and Plains All American Pipeline. Exxon and Plains announced the pipeline project in June.
Plains and another partner, Magellan Midstream Partners of Oklahoma, recently expanded their BridgeTex oil pipeline, which has served as the major artery from West Texas to the Houston region. Bottlenecks in the pipeline systems are slowing the the pace of growth in the Permian and forcing producers to sell their crude at substantial discounts to prices on the Gulf Coast.
Earlier this year, Exxon Mobil said it plans to triple its oil and gas production in the Permian by 2025, while also spending more than $2 billion on transportation and terminal upgrades in West Texas, including the expansion of its crude oil terminal in Wink. This proposed pipeline would originate at Wink.
Last year, Exxon Mobil agreed to spend up to $6.6 billion to buy the Permian acreage of Fort Worth’s prominent Bass family to more than double its Permian acreage holdings.
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