EnLink Midstream, LLC and EnLink Midstream Partners LP to Acquire Subsidiaries of Tall Oak Midstream, LLC for $1.55 Billion
Tall
Oak Midstream, LLC (“Tall Oak”) and its equity partner EnCap
Flatrock Midstream (“EnCap Flatrock”) today announced that a
subsidiary of EnLink
Midstream Partners, LP (NYSE: ENLK) and EnLink
Midstream LLC (NYSE: ENLC) (together, “EnLink”) has signed
definitive agreements to acquire subsidiaries of Tall Oak Midstream, LLC
for approximately $1.55 billion, subject to certain adjustments. These
subsidiary entities hold substantially all of Tall Oak’s Oklahoma assets
which include the STACK Natural Gas System, the STACK Crude Oil System
and the CNOW Natural Gas System.
Established in January 2014, Tall Oak is a midstream company focused on
developing and operating crude oil and natural gas gathering,
compression, processing, treating, transportation and marketing services
to oil and gas producers in the Mid-Continent. Tall Oak’s management
team will continue to pursue new midstream opportunities across North
America through Tall Oak Midstream II, LLC (“Tall Oak II”).
CEO Perspective
“There has been a lot of interest in acquiring Tall Oak’s assets over
the past several months. These are world-class assets located in the
heart of some of the fastest growing and most economic plays in the
United States,” said Tall Oak President and CEO Ryan Lewellyn. “We
wanted to ensure that our customers would be well served, so we were
very selective when it came to choosing an acquirer. EnLink is a
top-tier operator that shares our values and is well positioned to
provide our Mid-Continent customers with exceptional service going
forward. We are excited to work closely with the EnLink team over the
coming months to ensure a smooth transition of services to capture the
exciting growth opportunities that surround the Tall Oak assets.
“We started with a vision, we put together a remarkable team, and in
less than two years with the trust and support of our producer
customers, we developed a footprint that includes more than 500 miles of
pipeline in various phases of operation and construction, multiple
compressor stations and 175 MMcf/d in processing capacity. I would like
to recognize my partners and co-founders — Chief Commercial Officer
Carlos Evans, Chief Financial Officer Max Myers and Chief Operating
Officer Lindel Larison — for their exemplary leadership and remarkable
efforts. The accomplishments of our entire team have been nothing short
of extraordinary, and we are blessed to move forward together with EnCap
Flatrock as Tall Oak II.”
From EnCap Flatrock Midstream
“We are pleased to join Tall Oak in announcing this transaction,” said
Dennis Jaggi, one of EnCap Flatrock’s three managing partners and a
member of the Tall Oak board of directors. “Ryan, Carlos, Max and Lindel
and their teams have done an outstanding job in the Mid-Continent, and
we are excited that this realization will result in very strong returns
for our institutional investors. Additionally, we are pleased that we
will be able to participate in the growth of these assets through
ownership of ENLC securities. Tall Oak developed highly attractive
assets, which are complementary with EnLink’s existing operations in
Oklahoma, and we are confident that Tall Oak’s assets will experience
greater growth as a part of the EnLink platform. We look forward to
continuing to support the Tall Oak management team as we work together
to grow Tall Oak II.”
Tall Oak Assets
Tall Oak’s STACK systems serve multiple oil and gas producers
targeting the play’s liquids-rich, stacked pay zones in Blaine,
Canadian, Kingfisher and Grady counties. The STACK Natural Gas System
includes approximately 200 miles of gathering pipelines with an
additional 75 miles under construction or in development, two compressor
stations and the Chisholm Plant, a state-of-the-art cryogenic gas
processing plant located in Kingfisher County. The plant was placed in
service in October 2015 and has a current capacity of 100 million cubic
feet per day (MMcf/d). The facility is currently being expanded by an
additional 200 MMcf/d, which is expected to be completed in the third
quarter of 2016. The facility connects to the Panhandle Eastern
Pipeline, OneOK Gas Transmission for residue gas and the OneOK NGL
Pipeline.
Tall Oak announced development of the STACK Crude Oil System in May
2015. The initial crude oil system will consist of a storage and
truck-unloading facility east of Okarche, Oklahoma, in the center of the
STACK play, and a 20-mile pipeline that will provide connections to
multiple downstream markets.
Tall Oak’s CNOW Natural Gas System serves multiple producers targeting
stacked pay zones in Creek, Logan, Lincoln, Noble, Payne and Pawnee
counties. Assets include 175 miles of natural gas gathering pipeline and
three compressor stations. An additional 50 miles of pipeline are under
construction or in development. The CNOW System also includes the Battle
Ridge Plant, a state-of-the-art cryogenic gas processing plant located
in Payne County. The plant has a current capacity of 75 MMcf/d and
direct access to premium downstream markets, including Southern Star
Central Gas Pipeline, Enable Gas Transmission for residue gas and OneOK
NGL.
A 42-mile, 16-inch high-pressure header pipeline is under construction
to connect the two systems, which will provide customers with additional
operational flexibility and access to premium residue markets. Tall Oak
expects to bring the connector into service by the end of 2015.
Transaction Detail
Under the terms of the definitive agreements, EnLink Midstream Partners,
LP (the “Partnership”) and EnLink Midstream, LLC (the “General Partner”)
will jointly acquire subsidiaries of Tall Oak Midstream, LLC for
approximately $1.55 billion. Approximately 84 percent of the combined
acquisition will be acquired by the Partnership, and the remainder will
be acquired by the General Partner in exchange for ENLC common units
which will be issued at closing. The purchase price will be paid in
installments, with the first installment of $1.05 billion paid at
closing and the final installment of $500 million paid no later than the
first anniversary of the closing date with the option to defer $250
million of the final installment up to 24 months following the closing
date.
The transaction, which is expected to close in the first quarter 2016,
is subject to the satisfaction of customary closing conditions,
including applicable regulatory approvals as well as the completion of
Devon Energy Corp.’s (NYSE: DVN) acquisition of Felix Energy, LLC, which
is expected to occur concurrently with the Tall Oak closing.
Legal and Financial Advisers
Citi is serving as sole financial adviser to Tall Oak with primary
leadership from Tim Kisling, Michael Jamieson and Claudio Sauer. Paul
Hastings LLP serves as legal counsel to Tall Oak Midstream with Jimmy
Vallee, a partner in the firm’s Houston office, in the lead role with
assistance from associate Kim Hicks. Thompson & Knight LLP represents
EnCap Flatrock Midstream with partner Sarah E. McLean leading that
firm’s legal team from Thompson & Knight’s Houston office.
About Tall Oak Midstream, LLC
Based in Oklahoma City, Tall Oak Midstream is an innovative midstream
company led by its four founders; Ryan D. Lewellyn, CEO; Max J. Myers,
CFO; Carlos P. Evans, CCO; and Lindel R. Larison, COO. Tall Oak is
dedicated to bringing a fresh perspective to serving oil and gas
producers with a full suite of midstream services. Core capabilities
include natural gas gathering, compression, treating and processing;
crude oil gathering and transportation; condensate and water handling;
and product marketing solutions. Visit www.talloakmidstream.com
for more information.
About EnCap Flatrock Midstream
EnCap Flatrock Midstream provides value-added private equity capital to
proven management teams focused on midstream infrastructure
opportunities across North America. The firm was formed in 2008 by a
partnership between EnCap Investments L.P. and Flatrock Energy Advisors.
Based in San Antonio with offices in Oklahoma City and Houston, EnCap
Flatrock is led by Managing Partners William D. Waldrip, Dennis F. Jaggi
and William R. Lemmons Jr. The firm manages investment commitments of
nearly $6 billion from a broad group of institutional investors. EnCap
Flatrock is currently making commitments to new management teams from
EFM Fund III, a $3 billion fund. www.efmidstream.com.
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