Western Gas to acquire Nuevo Midstream for $1.5 billion

Nuevo Midstream and Nuevo’s private equity backer, EnCap Flatrock Midstream, announced that Western Gas Partners will acquire Nuevo for $1.5 billion in cash.

The transaction is expected to close by the end of the year, pending the completion of customary regulatory approvals and closing conditions.

Formed in April 2011 with an initial $65 million equity commitment from EnCap Flatrock Midstream and management, Nuevo is a pure-play midstream company focused on developing and operating natural gas gathering, compression, processing, treating, transportation and marketing services to oil and gas producers in the Delaware Basin in West Texas and Southeast New Mexico.

Equity commitments to Nuevo ultimately reached more than $300 million from a group of investors led by EFM Funds I and II, management and Wells Fargo Energy Capital.

Western Gas is a growth-oriented master limited partnership formed by Anadarko Petroleum to own, operate, acquire and develop midstream energy assets to serve Anadarko and other third-party producers and customers.

Nuevo’s operations began in August 2011 when the company recommissioned a small refrigerated JT processing plant near Orla, Texas.

Today, the company’s assets include 300 million cubic feet per day (MMcf/d) of operational cryogenic processing capacity at its Ramsey processing complex in Reeves County, Texas; 1,800 gallons per minute (gpm) of treating capacity; four field compressor stations; and a 275-mile gas gathering system that spans a five-county area.

An additional 30 miles of gathering pipeline is under construction with an additional 400 MMcf/d of processing capacity scheduled to be in service in 2015.

Nuevo’s gathering and processing system is supported by long-term acreage dedications of approximately 150,000 acres and volume commitments from 47 producers operating in an area with multiple, stacked pay zones.

Many of Nuevo’s producer customers are blue-chip shale developers who have substantial drilling and development programs on the dedicated acreage and have identified the Delaware Basin as a significant driver of future production growth.

“We are very pleased with the outcome of our efforts in the Delaware Basin. It takes the right vision, the right people and the right financial partner to be successful. Nuevo is fortunate to have all three,” said Nuevo CEO Jay Lendrum. “Our strategy was to enter the Delaware Basin early, execute quickly to get sufficient infrastructure in place ahead of drilling schedules, and continue building on our first-mover advantage.

“We have a long-standing relationship with Western Gas and admire its management team," he added. "They are excellent operators with the ability to expand on the asset base we have put in place and are a great fit for both our customers and employees. We look forward to a seamless transition with a focus on continuing to provide excellent service.”

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