The Money Backers: Energy Capital Partners

The Money Backers: Energy Capital Partners

In RMR’s continuing series The Money Backers, we give readers a glimpse of who’s who and who owns what in energy’s private equity world.  From the largest to the smallest to the newest, we look especially at those firms making hay in the midstream industry to provide the capital infusion required that give startups and growth projects liftoff.

Energy Capital Partners

Energy Capital Partners is a private equity and credit investor focused on existing and new-build energy infrastructure projects.

With offices in N.J., N.Y., and Houston, Energy Capital Partners (ECP) puts its capital and intuition on North American energy infrastructure that relies on contracted or fee-based revenues. This 40-year-old private equity firm zeroes in on new and existing companies with growth projects in the power generation, renewables, midstream, and environmental sectors. ECP’s most recent acquisition occurred in February with the $400 million purchase of Texas-based Centerpoint Energy’s natural gas retail business.

With $19 billion in capital commitments, ECP spreads its midstream investments across terminaling and storage; on- and offshore natural gas production facilities; petrochemicals processing and storage; gathering, processing and fractionation; and crude oil, natural gas, and water pipelines.

Here’s a look at the firm’s current midstream superstars.

  • With an initial “Let’s make some noise” of up to $500 million from ECP, Houston-based Next Wave Energy is moving forward with plans to construct its Project Traveler—a 28 MBPD, ethylene-to-alkylate plant near the Houston Ship Channel. The Traveler will convert NGL-based products like ethylene and isobutane into gasoline blend stock then pipe the produced alkylate to two gasoline-blending and marine terminal facilities in Pasadena. The plant is scheduled for production in mid-2022.
  • From its headquarters in Eddy County, N.M., Sendero Midstream operates the Sendero Carlsbad Gathering and Processing system. Located in the heart of the Northern Delaware sub-basin, the Carlsbad system includes 100 miles of gas gathering pipelines and two gas processing facilities that, together, offer 350 MMCFD of capacity.
  • Based in Houston, Summit Midstream operates natural gas, crude oil and produced water-gathering systems in the Appalachia, Williston, DJ, Fort Worth, and Permian basins. The company also holds legacy assets in the Piceance Basin, as well as the Barnett and Marcellus shale plays. Summit currently is developing the 135-mile Double E Pipeline, which will offer a capacity of 1.35 BCFD and provide natural gas transportation service from multiple receipt points in the Delaware Permian to delivery points in and around the Waha Hub. Commissioning is expected in 2021.
  • Headquartered in Houston, Targa Resources is one of the nation’s largest independent midstream companies whose assets primarily lie in Okla., Texas, N.M., La., and Ala. The company’s operations include expansive gas gathering and processing systems in multiple basins, gas transportation pipelines, and crude oil transmission and storage.
  • US Development Group brings something different to the midstream party through its design, development, and operation of large-scale crude oil terminals. A big distinction of this company is its focus on acquiring or building terminals that offer the full breadth of multi-modal options, especially by rail. USDG’s assets include crude oil logistics terminals in Alberta, Can., Casper, Wyo., and Stroud, Okla., near the Cushing Hub.
  • A relative newcomer to ECP’s investment portfolio, Symmetry Energy Solutions in February purchased CenterPoint Energy Services, the Texas utility’s unregulated gas retail platform. Symmetry sells, stores, and supplies natural gas to approximately 30,000 commercial and industrial customers, utilities, and municipalities across 35 states.

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The Midstream Range Rover

The Midstream Range Rover

You could say Sugar Land, Texas-based Rangeland Energy is somewhat of a train buff when it comes to building refined products hubs. Through its various iterations as a portfolio company of private equity firm EnCap Flatrock, this midstreamer has developed crude oil distribution systems that offer access to multi-modal transportation options to deliver crude oil, natural gas, NGLs, and other petroleum products to North American markets. And rail cars play a big part in this company’s business strategy.

Rangeland Energy

Rangeland Energy is a midstream company that meets the infrastructure requirements of refiners, commodities marketers, producers and retail distributors in resource plays and growing markets.

Rangeland first developed the Bakken’s N.D., COLT Hub in 2012, which offers connections to outbound pipeline systems and crude-by-rail service. That company sold months later to what is now known as Crestwood Energy Partners.

Develop, learn, operate, exit.

And Rangeland did.

Applying its newfound knowledge of rail service and listening to market demand, Rangeland in 2013 started up its RIO Hub in the Texas Delaware sub-basin, solidifying its midstream niche to provide pipeline connections and rail services at its terminals. But this time, Rangeland also expanded its capabilities to include inbound frack sand storage and loading outbound truck services.

Two years later, Rangeland Energy with the support of its financial backer, fired up a second, simultaneous venture to develop the South Texas Energy Products System (STEPS), which began operations in 2018. The system receives and stores refined products, LPG, and other hydrocarbons at a Corpus Christi terminal and transports supplies to terminals in Mexico. The Corpus Christi terminal is strategically located along the Kansas City Southern Railroad mainline.

At the same time, Rangeland took a hard look at western Canada, where E&Ps operating in the huge Montney shale play of Alberta have battled a dearth of natural gas midstream assets to transport supplies to markets. The company created subsidiary Rangeland Canada to introduce its commercial model to an underserved area and has now announced service on its new 52-mile Marten Hills Pipeline System. The crude oil and condensate pipelines originate near Slave Lake, Alberta, and terminate at the Edmonton Hub and refining market, a major crude oil rail loading terminal.

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Precarious Times in the Midstream Bakken

Precarious Times in the Midstream Bakken

A recent one-two punch in the Rockies has left oil and gas producers and midstreamers reeling to predict an uncertain fallout from two back-to-back events in an already head-shaking year.

When Okla. City-based Chesapeake Energy officially filed for bankruptcy June 28th, a tsunami of Plan Bs—many already in place—flooded midstream operators that held contracts with producers to gather, process and flow crude oil, natural gas and NGLs from the Bakken, Powder River Basin, South Texas, and Appalachia.

Crestwood Energy

Crestwood Equity Partners LP (NYSE: CEQP) is a publicly traded master limited partnership that owns and operates midstream assets located primarily in the Bakken Shale, Delaware Basin, Powder River Basin, Marcellus Shale, Barnett Shale and Fayetteville Shale.

Now, one week later, the U.S. District Court in Wash., D.C. has handed down a decision to shut down and completely drain the 1,172-mile Dakota Access Pipeline (DAPL). DAPL is a major pipeline artery out of the Bakken, transporting 570,000 BPD of crude oil from N.D., to Ill., where it connects with Energy Transfer’s crude oil pipeline that extends to South Texas markets. Energy Transfer and its DAPL partners have 30 days from July 6 to comply with the ruling. Energy Transfer plans to appeal.

For at least one midstream operator, the untimely crush of events between Chesapeake’s bankruptcy and DAPL has resulted in a go-forward plan to assure its Bakken producer customers in these precarious times.

Houston-based Crestwood Equity Partners’ operations gobble up a chunk of the nation’s midstream map with crude oil, natural gas, and NGLs assets that include gathering and processing, storage, and transportation predominantly in the Bakken, Powder River and Marcellus. Chesapeake just happens to be a longtime Crestwood customer in the Bakken. And Crestwood’s Arrow gathering system there connects to the DAPL.

So, how does a midstream operator get ahead of two hard punches in a week?

You get in front of it. Exactly as Crestwood has. The company immediately issued an update to its shareholders ensuring it had prepared for the Chesapeake bankruptcy and remains well-positioned to maintain full operations throughout the bankruptcy proceedings to include gathering and processing natural gas with more than 320 Chesapeake wells connected to Crestwood’s Jackalope system.

In response to the DAPL situation, Crestwood has assured its customers that, no matter how the ball swings following court appeals, the company can ensure downstream market access via its Arrow system for 100% of its producer customers’ crude. The Arrow system connects to DAPL, Hiland and Tesoro pipelines. In addition, Crestwood can transport crude volumes to its COLT Hub Facility in N.D., by pipeline or truck. COLT is the leading crude oil terminal in the Bakken with multiple pipeline connections, storage capacity of 1.2 MMBbls, and rail loading capacity of 160 MBPD.

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How an Oil and Gas Billionaire Cast a Few Minnows Then Reeled in a Whale

How an Oil and Gas Billionaire Cast a Few Minnows Then Reeled in a Whale

Nearly 4,600 miles from Prudhoe Bay, Alaska, Houston-based Hilcorp Energy has closed on the largest acquisition of its corporate life. Founder Jeffrey Hildebrand, the previous CEO who now serves as the company’s executive chairman, sealed his name early on to a distinct oil and gas strategy that’s led to a most remarkable moment with the $5.6 billion acquisition of BP’s upstream and midstream assets in Alaska.

Hilcorp Energy

Hilcorp was founded in 1989 and their mission is to be the premier independent exploration production company in the country. Today, they are the largest privately owned oil and natural gas producer in the United States. They operate in Alabama, Alaska, Colorado, Louisiana, New Mexico, Ohio, Pennsylvania, Texas, and Wyoming.

Growing the largest independent oil and gas company in the nation, Hildebrand set off from Exxon in the late 1980s as a geologist and petroleum engineer and soon discovered wild success reinvigorating old and declining oil and gas fields. Hilcorp’s operations currently lie in Ala., Alaska, Colo., La., N.M., Ohio, Pa., Texas and Wyo. But it’s Alaska where Hildebrand discovered a certain calling that now has airlifted Hilcorp into a new stratosphere.

But first, a little backstory because this is how certain oil and gas companies have discovered a sweet spot for their own distinct strategy.

Founded in 1989, Hilcorp, under Hildebrand’s leadership, began snapping up oil and gas leases on the cheap during Alaska’s annual Cook Inlet auctions, most often as the lone bidder. With the Prudhoe Bay oil field in decline, the company earned a solid reputation for deploying new technology that squeezed out higher production from old assets there bought from energy majors who moved on to other, more lucrative projects.

Over time, Hildebrand and Hilcorp proved to be an Alaskan oil and gas champ that bought up mature fields and exploited reserves using its innovations that realized a hefty profit. In short order, Hilcorp became the primary operator in the Cook Inlet, which today is the only supply of natural gas to feed Anchorage and Southcentral Alaska. As recently as June 24, Hilcorp bid on and won another 7,146 acres at the Cook Inlet for an average price of $26.76 per acre. Again, the solitary bidder. The company now is considered the largest private operator and gas supplier in the state. And that’s before the latest BP deal.

When BP in August last year announced parting ways with $10 billion in assets by 2020—specifically the company’s Alaska operations—Hilcorp leaped on the opportunity with a $5.6 billion purchase offer that was quickly accepted. Part one of this megadeal includes oil and gas leases within Point Thomson, Milne Point, and Prudhoe Bay, making Hilcorp the second-largest producer in the state behind ConocoPhillips, as well as the operator of the massive Prudhoe Bay oil field. The acquired leases will add to Hilcorp’s already sizeable producing assets there, which will augment its more than 530,000 gross acres and 500+ operating wells.

Part two, which is expected to be approved by local regulators in September, includes BP’s 50% ownership in the 800-mile Trans Alaska Pipeline System (TAPS). Constructed in 1977, TAPS extends from Prudhoe Bay in the north to Valdez on the southern coast and is one of the largest pipeline systems in the world. The total divestiture by BP for all intents and purposes ends the era of the oil giant in the Land of the Midnight Sun dating back to 1959.

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National Fuel Grows Its Energy Empire

National Fuel Grows Its Energy Empire

N.Y.-based National Fuel Resources has once again diversified its midstream capabilities with the acquisition of a crude oil terminal in Gibson, La., by the company’s Empire Pipeline subsidiary. Previously owned and operated by Equilon (Shell Oil Products and Shell Oil Co.), the new assets mark Empire’s first entry into crude oil terminalling—an area it plans to grow through future acquisitions.

National Fuel Reources

National Fuel Resources, Inc. (NFR) is among the largest non-utility suppliers of natural gas in this region. For more than 25 years, NFR has been helping businesses in New York and Pennsylvania with their natural gas costs.

Located in Terrebonne Parish near the Intracoastal Waterway, the Gibson Terminal offers 300,000 barrels of tank storage along with barge loading and unloading and a truck receiving station. The facility handles sweet and sour crude from the Eagle Ford, Permian, and Bakken via the Ship Shoal Pipeline System, the Atchafalaya Pipeline, and the Magellan Pipeline. Empire says it also plans to build a bi-directional pipeline connection to Shell’s 350-mile Zydeco pipeline.

National Fuel in May acquired Shell’s upstream and midstream gathering assets in Pa., for $541 million. The transaction included 200,000 acres in Tioga County, with net proved developed gas reserves of approximately 710 BCF, 142 miles of gathering pipe, and more than 100 miles of water pipelines—all of which support the production operations.

National Fuel’s business segments include a natural gas utility, exploration and production, natural gas transportation pipelines and storage, and natural gas gathering.

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