Enterprise Products Partners and Piñon Midstream (a portfolio company of Black Bay Energy Capital) announced today that Enterprise’s affiliate has entered into a definitive agreement to acquire Piñon Midstream in a debt-free transaction for $950 million in cash consideration. Piñon Midstream offers natural gas gathering and treating services in the core of the prolific eastern flank of the Delaware Basin in New Mexico and Texas.
Piñon Midstream’s assets include about 50 miles of natural gas gathering and redelivery pipelines, five 3-stage compressor stations, 270 million cubic feet per day (MMcf/d) of existing hydrogen sulfide and carbon dioxide treating facilities with an expansion to 450 MMcf/d of capacity expected to be completed in the second half of 2025, and two of the highest capacity and deepest acid gas injection (AGI) wells in the basin. As part of this deal, Enterprise is evaluating locations for a third injection well supporting up to 750 MMcf/d of total treating capacity.
This business is supported with fee-based contracts with long-term acreage dedications, including minimum volume commitments. And Piñon Midstream’s monitoring, reporting, and verification (MRV) plan for permanent sequestration of carbon dioxide in its two AGI wells located at its Dark Horse Treating Facility in Lea County, New Mexico was approved by the Environmental Protection Agency in June of 2024. This milestone MRV approval satisfies a major requirement for 45Q tax credit eligibility.
Enterprise estimates this area of the Delaware Basin – which is largely comprised of Lea County, New Mexico and Winkler County, Texas – has over 7,500 remaining well locations and has access to at least six geologic production benches. And drilling activity in this area has generally been restricted due to the lack of sour natural gas treating and acid gas injection well capacity as well as the lengthy permitting process for acid gas injection wells which can take up to two years.
This deal is expected to be completed in the fourth quarter of 2024, subject to customary regulatory approvals. The transaction is expected to be funded using cash on hand and borrowings under Enterprise’s existing commercial paper and bank credit facilities.
Piñon Midstream retained Piper Sandler & Co. as its financial advisor and Kirkland & Ellis LLP as its legal advisor. And Locke Lord LLP and Sidley Austin LLP served as legal advisors to Enterprise.
KEY QUOTES:
“We are excited to announce the acquisition of Piñon Midstream. We believe the Piñon management team has developed the premier sour natural gas treating system in the Delaware Basin. These assets accelerate our entry into this region by at least three or four years. These assets are highly complementary to our midstream energy system and provide us an excellent entry point into the eastern flank of the Delaware Basin for us to expand our natural gas processing footprint. Our entry will provide producers a choice for reliable and value-added processing services.”
“We believe this acquisition will generate distributable cash flow accretion of $0.03 per unit in 2025, our first full year of ownership, before considering the benefit of any commercial and operating synergies.”
- A. J. “Jim” Teague, co-chief executive officer of Enterprise’s general partner
“The Piñon team is thrilled to contribute our unique Delaware Basin gas treating system to Enterprise, a true leader in the midstream energy business. Our team, and specifically our incredible field personnel and loyal employees, set out to build the premier sour gas treatment and carbon sequestration asset in the market and, with the support of our producer clients, achieved our goal. We would also like to thank the Black Bay Energy Capital team for their close partnership and support to start this business during an extremely challenging time in the energy markets.”
- Steven Green, CEO of Piñon Midstream
“Black Bay has a history of partnering with talented entrepreneurs to build best-in-class businesses, such as Piñon Midstream, and also positioning them as strategic acquisition candidates for larger acquirors seeking growth opportunities. We would like to thank Steven Green, Adam Wilson, David Cargill, Patrick Westerheide and the rest of the Piñon management team for their outstanding and relentless efforts in achieving this very successful outcome.”
- Michael LeBourgeois, Managing Partner at Black Bay
“The Piñon team successfully executed on their vision to build and scale critical H2S and CO2 treatment infrastructure for operators in the prolific Delaware Basin.”
- Sam Scofield, Vice President at Black Bay
