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Permian Basin midstream assets become hot purchase item

By Luke Geiver | January 25, 2017

Acreage blocks in the Permian Basin aren’t the only hot asset drawing a major investment. Midstream asset operators and infrastructure firms are now looking to acquire gathering infrastructure.

For $1.25 billion, Plains All American Pipeline LLC has purchased an oil gathering system located in the northern portion of the Delware Basin that has substantial acreage dedications from oil producers in the region. “The Northern Delaware Basin is an area that is experiencing increased activity levels and significant industry investment,” said Greg Armstrong, CEO of PAA. “We expect aggregate crude oil production on the dedicated acreage to double over the next two to three years, and we believe that overall Permian Basin crude oil volumes have the potential to grow as much as 50 percent or more during this same time period.”

PAA pointed to the attractive economic returns at $45 oil and $2.50 natural gas, along with the presence of dedicated producers in the area of the gathering lines as reasons for the acquisition of the Alpha Holding Company LLC’s assets. Alpha is a joint venture between Concho Resources Inc. and Frontier Midstream Solutions LLC. Since May 2016, the Delaware has added 70 rigs and the greater Permian Basin has added 144 rigs, or, 60 percent of total rig additions over that time period.

Outrigger Energy LLC, a Denver-based private midstream service company, has sold its Permian Basin assets for $1.5 billion to Targa Resources Corp. The purchased assets include natural gas gathering lines, processing lines, and crude oil gathering systems spread throughout five counties in the heart of the Delaware Basin and another three counties in the Midland Basin.

“With our systems located in the highest growth areas of the Midland and Delaware Basins, it was extremely important for us to transfer our assets to a midstream company that has the experience, staffing and resources to accommodate the growth rates these systems will experience over the next several years,” said Dave Keanini, president and CEO of Outrigger.