Concho Resources Inc. (Concho) and Frontier Midstream Solutions, LLC (Frontier) have entered into agreements to sell 100% of their respective ownership interests of Alpha Holding Company, LLC – the owner of the Alpha Crude Connector system (ACC) – to Plains All American Pipeline, L.P (Plains). While the two companies have entered into separate agreements, their combined total is US$1.215 billion.
Concho and Frontier formed the ACC joint venture in 2014 to construct a crude oil transportation system in the northern Delaware basin. ACC – the first large scale crude oil gathering system in the northern Delaware basin – includes a 515 mile gathering system, as well as crude oil storage facilities, truck terminals and multiple receipt points. The system became operational in late 2015. At that time, Concho commenced a ten year crude oil acreage dedication and transportation agreement. After the closing of this transaction, the dedication and transportation agreement, which includes the tariff structure, will remain in place.
Plains intends to investment in new interconnects and other enhancements to provide greater flow assurance and support the ongoing development of the northern Delaware basin. In addition, Plains’ ownership of ACC will enhance access to multiple markets, including important crude oil export gateways.
Concho owns 50% of the joint venture with an option to purchase Frontier’s ownership interest at a predetermined multiple of invested capital. After adjusting for debt and working capital, Concho expects to receive net cash proceeds from the sale of approximately US$800 million. As of 31 December, 2016, Concho’s net investment in ACC was approximately US$130 million. Closing of these agreements is expected to occur in 1H17, subject to customary terms and conditions.
Tim Leach, Concho’s Chairman, CEO and President, commented: “Our investment in ACC was intended to serve two primary objectives within our core upstream business – provide pipeline infrastructure to support our rapid crude oil growth in the northern Delaware basin and improve wellhead economics through better price realisations. With both of these objectives secured for the long term, plus the ongoing flexibility to access multiple key markets, we have accomplished our goal of developing a premier it execution and operation of ACC, and I look forward to expanding our strong relationship with Plains. Their extensive crude oil infrastructure and logistics expertise will support our continued development of our high quality drilling inventory in the northern Delaware basin.”
Read the article online at: https://www.worldpipelines.com/contracts-and-tenders/27012017/plains-all-american-pipeline-to-acquire-interests-in-alpha-holding-company/