Private capital firm, Bakken pipeline execs form midstream company

By The Bakken Magazine Staff | July 15, 2015

Quantum Energy Partners, a private equity capital firm focused on the oil and gas industry, has partnered with the founders of a crude oil and natural gas midstream company purchased earlier this year by Kinder Morgan for $3 billion, to form a new midstream company. Intensity Midstream will be run by the founders of Hiland Partners LP, the firm that  previously focused on the Bakken shale play through its work on the Double H pipeline. The partnership will be supported by initial equity commitments in excess of $300 million from Quantum and the founders, Joseph Griffin, formerly president and CEO of Hiland, and Derek Gipson, chief financial officer. Intensity will pursue the acquisition, development and operation of high quality midstream assets across various North American shale plays.

“We are excited to grow a producer-focused midstream company that will provide our customers with creative midstream solutions,” said Griffin. “We intend to bring responsiveness, quick decision making and solid execution to these solutions. We decided to partner with Quantum because of the firm’s deep industry relationships, partnership orientation, shared core values and similar investing philosophy.”

The founders successfully re-focused the partnership into the largest dual provider of crude oil and natural gas midstream services in the Bakken until its sale to Kinder Morgan Inc. for $3 billion in February.

“We took into account lower oil prices,” Steve Kean, KMI president, said of the acquisition. According to Kean, KMI used revised production totals from its Bakken customers and then reduced them again before arriving at what it believes the gathering system would receive and generate for revenue. “We paid a price to get a position in this basin,” he said.

Through the acquisition, KMI received all of Hiland’s crude gathering and transportation pipelines in North Dakota and Montana.

The Double H is a 485-mile pipeline that moves crude oil from Dore, North Dakota, to Guernsey, Wyoming, where it interconnects with the Pony Express line connected to Cushing, Oklahoma. Although the Double H is nearing completion, it could reach 108,000 barrels of oil per day capacity by 2016. Take-or-pay contracts are currently in place for roughly 60,000 bopd and an open-season call for additional producer commitments is currently underway.

“We are thrilled to be partnering with such an entrepreneurial team and look forward to building a substantial midstream platform alongside Joe and Derek,” said Bill Montgomery, managing director of Quantum. “We are confident that the founders’ extensive operational experience, impressive track record, and strong customer relationship will allow them to succeed in today’s dynamic midstream environment.”