Genesis Energy said this week that it had entered into an agreement to sell midstream assets in Wyoming’s Powder River Basin to an affiliate of Silver Creek Midstream for US$300 million.
Genesis is intending to use the proceeds from the sale to pay off debt.
The assets being sold include a pipeline, crude-gathering system and a rail facility in Wyoming, the company said. The press release noted that Silver Creek was exercising its option to acquire the assets. This came after Genesis recently announced that, in exchange for a US$30 million payment, it had granted an unnamed company a time-limited option to purchase non-core assets.
Silver Creek was formed in 2017, receiving two investments of US$150 million each from private equity firm Tailwater Capital in November 2017 and in May this year.
Tailwater’s second investment is helping Silver Creek to finish building its own 250-mile (402-km) crude-gathering system in the Powder River Basin, which is due to be in service by February 2019. The system will include a 16-inch (406-mm) trunk line with over 150,000 bpd of capacity and three pump stations with over 150,000 barrels of storage.
In February, Silver Creek said it had entered into a joint venture with Tallgrass Energy Partners to develop the 80-mile (129-km) Iron Horse pipeline to transport oil from the Powder River Basin to Guernsey, Wyoming. The pipeline is expected to connect to the gathering system that Silver Creek is currently constructing.
The deal comes as the Powder River Basin is being talked up as the next emerging shale region. Companies expanding their operations in Wyoming include EOG Resources and Anadarko Petroleum. The region is benefiting from favourable well economics and infrastructure build-out at time when the Permian Basin – the US’ leading shale region – is struggling with takeaway capacity bottlenecks and widening price differentials.
This week Reuters cited anonymous sources as saying that a series of largely undisclosed land deals was fuelling interest in both conventional and shale formations in the Powder River Basin. According to the sources, the buyers involved include Rebellion Energy, Vermilion Energy and Navigation Powder River.