Crestwood Niobrara has secured sole ownership and operatorship of Jackalope Gas Gathering Services, a Powder River Basin joint venture, via a US$485 million deal to acquire the interest of its 50:50 partner, Williams Cos.
The deal was announced on April 10 by Crestwood Niobrara’s parent firm, Crestwood Equity Partners. The company said the deal positioned it to be the leading gathering and processing company in the Powder River Basin, which spans northeast Wyoming and southeast Montana. The focus of operators in the Powder River has increasingly shifted to shale in recent years as technology has evolved and allowed them to tap more challenging formations.
The Jackalope system is located in Wyoming’s Converse County and connects to Kinder Morgan’s Wyoming Interstate pipeline and Oneok’s Bakken NGL pipeline.
The Jackalope assets provide gathering, compression and processing services and include the Jackalope gas gathering system and the Bucking Horse processing plant. Under the joint venture, Crestwood had served as the marketer, responsible for commercial services.
Crestwood’s chairman, president and CEO, Robert Phillips, said the deal “marks a key step in Crestwood’s long-term growth objectives to accretively build meaningful scale in a core franchise position, which offers substantial producer development growth potential while positioning Crestwood to be one of the largest G&P service providers in the highly prolific Powder River Basin”.
According to Crestwood, the Jackalope assets are expected to deliver an annual cash flow of US$100 million this year. The contribution is anticipated to increase to around US$150 million by 2021. The Jackalope system is supported by a 388,000-acre (1.6-square km) dedication from Chesapeake Energy and Panther Energy. Jackalope currently gathers an average of 140 mmcf (4.0 mcm) per day of gas. Crestwood said previously that it was planning to expand the system’s capacity to 345 mmcf (9.8 mcm) per day by the fourth quarter of this year or the first quarter of 2020. The two companies have described the Powder River Basin as an underserved region.
Williams’ CEO, Alan Armstrong, called the deal a “win-win transaction” that frees up money to re-deploy into high-return assets.