Press Esc to close

WorldOil

World Oil News Center



Devon Energy, Crosstex Energy to create new midstream business

OKLAHOMA CITY and DALLAS -- Devon Energy Corporation, Crosstex Energy, Inc. and Crosstex Energy, L.P. (collectively Crosstex) have announced the signing of definitive agreements to combine substantially all of Devon’s U.S. midstream assets with Crosstex’s assets to form a new midstream business.

The new business will consist of two publicly traded entities: the Master Limited Partnership and a General Partner entity. The new company is expected to have adjusted EBITDA of approximately $700 million in 2014, before synergies. The transaction is expected to be immediately accretive to both Crosstex and Devon. A name for the new company will be announced prior to the closing of the transaction.

The combination of Devon’s and Crosstex’s midstream systems, including gathering and transportation pipelines, and processing, fractionation and logistics assets, provides the new company with diversification and scale, along with an enhanced liquids-oriented growth profile. These assets are located in many of North America’s premier oil and gas regions, including the Barnett shale, Permian basin, Cana and Arkoma Woodford, Eagle Ford, Haynesville, Gulf Coast, Utica and Marcellus.

The new company will have approximately 7,300 mi of gathering and transportation pipelines, 13 processing plants with 3.3 Bcf/day of net processing capacity, 6 fractionators with 165 MBbl/day of net fractionation capacity, as well as barge and rail terminals, product storage facilities, brine disposal wells and an extensive crude oil trucking fleet.

Under the terms of the definitive agreements, in exchange for a controlling interest in both the new General Partner entity and the Master Limited Partnership, Devon will contribute its equity interest in a newly formed Devon subsidiary (Devon Holdings) and $100 million in cash.

Devon Holdings will own Devon’s midstream assets in the Barnett shale in North Texas, the Cana and Arkoma Woodford shales in Oklahoma and Devon’s interest in Gulf Coast Fractionators in Mt. Belvieu, Texas. The Master Limited Partnership and the General Partner will each own 50% of Devon Holdings. Current stockholders of Crosstex Energy, Inc. will receive one unit in the General Partner entity for each share of Crosstex Energy, Inc. they own, as well as a one-time cash payment at closing of approximately $2.00 per share or $100 million in aggregate. Devon’s contributed assets are valued at $4.8 billion in the transaction.

Devon, with its strong upstream development portfolio, will be the new company’s largest customer. Devon’s inventory of organic exploration and development opportunities, combined with Crosstex’s other high-quality third-party customers, provides the Master Limited Partnership a visible path to long-term growth in distributable cash flow. Over time, the potential exists for the General Partner to drop-down its 50% interest in Devon Holdings to the Master Limited Partnership, further enhancing growth for unitholders. Owners of the General Partner entity will benefit from the increased capacity to pay dividends and the acceleration of achievement of the highest-tier incentive distributions through this transaction.

Following the close of the transaction, the new company will be headquartered in Dallas, Texas, with a continued employee presence in Oklahoma City.

The boards of directors of both Devon and Crosstex have unanimously approved the transaction. Until the transaction has closed, Devon’s midstream business and Crosstex will continue to operate as separate, independent companies. The newly constituted boards of directors for the General Partner entity and the general partner of the Master Limited Partnership will each be comprised of nine directors, including five members designated by Devon. John Richels, president and CEO of Devon Energy Corporation, will act as chairman. The executive management team of the new company will consist of senior officers from both Devon and Crosstex, led by Crosstex’s Barry E. Davis as president and CEO.

10/21/2013

 

Bookmark and Share


WO DATA HUB

EngineeringTablesIcon-Large

Engineering Data Tables

World Oil's specialized upstream Engineering Data Tables featuring the Drill Bit Classifier, Tubing Tables and more. Get Total Access today.

WO SUPPLEMENTS

2013 Fracturing Technology

2013 Fracturing Technology

MEDIA CENTER

By Digital Publisher

Drill Bit Classifier World Oil published its renowned Drill Bit Classifier in September 2013. The Drill Bit Classifier is a comprehensive listing of major manufacturers' d...

ENERGY EVENTS