Devon, Crosstex Form New Pipeline Company
Devon Energy Corp., Crosstex Energy Inc. and Crosstex Energy LP announced on Oct. 21 an agreement to combine assets to form a new midstream business.
The combination of Devon’s and Crosstex’s extensive midstream systems, including gathering and transportation pipelines, as well as processing, fractionation and logistics assets, provides the new company with diversification and scale, along with an enhanced liquids-oriented growth profile. These assets are located in many of North America’s premier oil and gas regions, including the Barnett shale, Permian Basin, Cana and Arkoma Woodford, Eagle Ford, Haynesville, Gulf Coast, Utica and Marcellus. The new company will have approximately 7,300 miles of gathering and transportation pipelines, 13 processing plants with 3.3 billion cubic feet per day (Bcf/d) of net processing capacity, six fractionators with 165 million barrels per day (bpd) of net fractionation capacity, as well as barge and rail terminals, product storage facilities, brine disposal wells and an extensive crude oil trucking fleet.
In exchange for a controlling interest in the new company, Devon will contribute its equity interest in a newly formed Devon subsidiary (Devon Holdings) and $100 million in cash. Devon Holdings will own Devon’s midstream assets in the Barnett shale in North Texas, the Cana and Arkoma Woodford shale plays in Oklahoma and Devon’s interest in Gulf Coast Fractionators in Mt. Belvieu, Texas. Devon, with its strong upstream development portfolio, will be the new company’s largest customer.
“The combined company’s midstream assets and expertise greatly accelerate the value proposition of Devon’s previously announced standalone master limited partnership in a manner that is highly accretive to our shareholders,” said John Richels, Devon’s president and CEO.
“Additionally, this transaction provides Devon a market-based valuation for these assets on a go forward basis.”
Following the close of the transaction, the New Company will be headquartered in Dallas, Texas, with a continued employee presence in Oklahoma City.
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