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Formation of a Delaware Basin midstream partnership

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World Pipelines,

EagleClaw Midstream, funds managed by Blackstone Energy Partners and I Squared Capital have announced that the parties have executed and concurrently closed binding agreements pursuant to which I Squared Capital has committed over US$500 million of cash and contributed its Delaware Basin midstream portfolio company, Pinnacle Midstream, and become a partner in BCP Raptor Holdco, the parent company for EagleClaw. In addition, the parties announced the closing of EagleClaw’s previously-announced acquisition of Caprock Midstream. Proceeds from I Squared Capital’s investment, together with additional investments by Blackstone and EagleClaw’s management team, are being used to fund EagleClaw’s continued growth, including the expansion of EagleClaw’s system, the acquisition of Caprock Midstream, and the ongoing construction of the Permian Highway Pipeline.

The investment by I Squared Capital and the acquisitions of Caprock and Pinnacle further augment EagleClaw’s position as the leading privately-held midstream operator in the Permian’s Delaware Basin in West Texas. Pro forma for these acquisitions, the company operates nearly 1000 miles of natural gas, natural gas liquids, crude, and water gathering pipelines; over 1.4 billion ft3/d of processing capacity (pro forma the completion of one plant currently in construction); and crude and water storage and disposal facilities. In addition, EagleClaw now has nearly half a million acres in the core of the southern Delaware Basin under long-term dedication for midstream services. EagleClaw is also a 50% partner with Kinder Morgan on the Permian Highway Pipeline, an approximately US$2 billion pipeline project designed to transport up to 2.0 billion ft3/d of natural gas from the Permian Basin to the Katy, Texas area, with connections to the Gulf Coast and Mexico markets. With the acquisition of Caprock Midstream and Pinnacle Midstream complete, the assets have been integrated into the EagleClaw system and now operate under the EagleClaw brand name. The recent announcement is the next step in the overall Delaware Basin midstream consolidation as EagleClaw continues to grow and diversify its business.

Prior to the acquisition, Pinnacle was an independent midstream company providing natural gas gathering and processing and crude oil gathering services to producers in the Delaware Basin. Pinnacle operates approximately 100 miles of natural gas and crude gathering pipeline, approximately 30 000 bbls of crude storage facilities, and a 60 million ft3/d natural gas processing facility. Pinnacle’s assets are located in close proximity to EagleClaw’s existing assets, providing a complementary asset footprint. Pinnacle serves several highly active producers, who have committed approximately 35 000 acres for long-term dedication of midstream services. The acquisition of Pinnacle by EagleClaw significantly benefits Pinnacle’s customers by enhancing flow assurance and reliability and providing additional flexibility for customers’ natural gas, crude, and NGL takeaway. Pinnacle is now a subsidiary of EagleClaw Midstream Ventures LLC. All field personnel of Pinnacle are being offered opportunities to remain with the company.

“The acquisition of Pinnacle, coming on the heels of our recent announcements of the acquisition of Caprock and our partnership on the Permian Highway Pipeline, is another exciting chapter in the continued growth story of EagleClaw,” stated Bob Milam, CEO of EagleClaw. “This transaction expands our business in every aspect, from asset footprint to customer diversity, while remaining true to EagleClaw’s core mission of providing best-in-class midstream service to Delaware Basin producers.”

David Foley, CEO of Blackstone Energy Partners, added, “We are very pleased with the strong operating performance of EagleClaw since the closing of our acquisition in June 2017 and its rapid growth via existing customers as well as through strategic, accretive acquisitions such as Caprock and Pinnacle. We are excited to welcome I Squared Capital to partner with us in this effort. As one of the leading global infrastructure firms, with experience in the midstream sector and substantial financial resources, I Squared Capital is an ideal partner for Blackstone and management as together we enable EagleClaw’s continued evolution into a major, fully-integrated midstream player, delivering comprehensive value-added services to Delaware Basin producers."

“We are excited to partner with Blackstone to invest in essential midstream infrastructure transporting critical resources from the Permian Basin,” commented Adil Rahmathulla, Partner at I Squared Capital. “We share EagleClaw management’s long-term strategic vision and are committed to supporting EagleClaw’s continued success and position as the largest pure-play privately-held Delaware Basin midstream business. Pinnacle Midstream’s facilities complement the existing EagleClaw portfolio well and position it soundly for continued robust growth.”

Jefferies LLC acted as Blackstone and EagleClaw’s financial advisor in connection with the transactions. Akin Gump acted as legal counsel on the acquisition of Caprock, and Vinson & Elkins acted as legal counsel on the acquisition of Pinnacle Midstream and partnership with I Squared Capital. Goldman Sachs and Greenhill acted as financial advisors to I Squared Capital, and Sidley Austin acted as legal counsel.

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