DTE Midstream is to acquire a gathering system and gathering pipeline in the Haynesville shale formation of Louisiana for $2.25 billion in cash, plus a $400 million milestone payment upon completion of the gathering pipeline in the second half of 2020.
Under the terms of the agreement, DTE will acquire 100 per cent of the assets from Momentum Midstream and Indigo Natural Resources, the primary gas producer supplying the system. Assets that are part of the acquisition include an existing gathering system and a 150-mile gathering pipeline under construction, which will be in service in the second half of 2020. The primary assets gather natural gas produced in the Haynesville shale basin and access multiple major downstream pipelines, including those serving the Gulf Coast.
Assets in Louisiana’s highly-economic Haynesville shale basin will enhance DTE Midstream’s business and provide access to growing Gulf Coast markets, says the company. The assets serve multiple markets, including Louisiana, the nation’s third largest natural gas consumer, and the growing Gulf Coast where demand for natural gas is rapidly increasing in the power, industrial and LNG export sectors. Furthermore, they are strategically located to meet this increasing demand given their proximity and access to multiple major downstream pipelines with bi-directional capability.
DTE has a proven track record of creating value in multiple basins starting more than 30 years ago in the Michigan producing basins, then the Texas Barnett Shale and more recently in the Appalachian basin. Haynesville provides the next opportunity for DTE to create significant value with its midstream assets in a very high-quality basin.
Through this acquisition, DTE Midstream is investing in economically strong and strategically situated assets that are supported by long-term contracts. The acquired assets are fully contracted with a remaining tenor of 13.5 years for the existing gathering system and a 10-year contract for the large diameter gathering pipeline that is currently under construction. Strong credit provisions are incorporated into the agreement that position Indigo, the system’s primary customer, with a strong balance sheet. Indigo is one of the largest private producers in the U.S., and the largest natural gas producer in Louisiana. It is an independent exploration and production company solely focused on production in the Haynesville basin.
The transaction is expected to close in the fourth quarter of 2019.
For more information visit www.dteenergy.com
