Sanchez Midstream Partners LP (SMP) has executed a series of agreements with Targa Resources Corp. pursuant to which the parties have merged their respective 50% interests in the entities that own the high pressure Carnero Gathering Line and Raptor Gas Processing Facility to form an expanded 50/50 joint venture in South Texas, referred to as the Carnero JV.

In addition to owning the Raptor Gas Processing Facility, the Carnero JV has acquired Targa’s 200 million cubic feet per day (mmcf/d) Silver Oak II Gas Processing Plant, located in Bee County Texas, which expands the processing capacity of the joint venture from 260 mmcf/d to 460 mmcf/d, and owns the full capacity of the Carnero Gathering Line, which has a design limit (without compression) of 400 mmcf/d.

Additional enhancements to the parties’ prior joint ventures include new dedication of over 315,000 gross Comanche acres in the Western Eagle Ford, operated by Sanchez Energy Corporation, under a new long-term firm gas gathering and processing agreement. 

The agreement with Sanchez Energy establishes commercial terms for the gathering of gas on the Carnero Gathering Line and processing at the Raptor Gas Processing Facility and Silver Oak II. Prior to execution of the agreement, Comanche volumes were gathered and processed on an interruptible basis, with the processing capabilities of the joint ventures limited by the capacity of the Raptor Gas Processing Facility.

“Having completed the transformation of SNMP to a midstream master limited partnership in 2017, we have worked diligently over the last several months to expand the partnership’s opportunity set in South Texas,” said Gerry Willinger, Chief Executive Officer of the general partner of SNMP.

“The structure of the transaction greatly simplifies our previous joint ventures with Targa, which facilitates greater operating efficiencies and provides a solid platform for the continuing growth of the Carnero JV in South Texas. The transaction is expected to be immediately accretive to the Partnership, with benefits that increase as the joint venture services the needs of Sanchez Energy and other producers and marketers in South Texas.

“By adding Silver Oak II and the additional capacity of the Carnero Gathering Line to the Carnero JV, our South Texas midstream assets, which include Western Catarina Midstream and the Seco Pipeline, are strategically positioned to capture the increase in volumes from the significant development activity underway in the Western Eagle Ford without spending any incremental development dollars. As we anticipate increasing volumes through our expanded system in 2018 and the years to come, we have preemptively put ourselves in a position to continue to grow the Partnership while being disciplined with capital. Accordingly, we see the new, expanded joint venture as a key step in positioning the Partnership for continued growth in South Texas.”

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30th May 2018

30th May 2018