Current TEP Stock Info

Silver Creek Midstream, LLC and Tall Grass Energy Partners, LP (ticker: TEP) have signed an agreement to develop the Iron Horse Pipeline, a joint venture pipeline to transport crude oil from the Powder River Basin (PRB) to Guernsey, Wyoming.

Iron Horse will connect Silver Creek’s developing gathering system to the Tallgrass Guernsey Terminal, which is currently under construction, and then to Tallgrass’s Pony Express crude pipeline system and other pipelines at Guernsey.

Iron Horse and Pony Express intend to create a joint tariff to offer producers and marketers a single rate and direct access to the multiple refineries on Pony Express and to the Cushing, Oklahoma crude oil hub, from the PRB production zone.

Silver Creek Partners, Tallgrass Energy Will Transport PRB Crude to Wyoming

Iron Horse Pipeline – Open Season, Feb. 2018

Tallgrass sells gathering system to Silver Creek

In addition to forming the joint venture, Tallgrass has agreed and signed definitive documents to sell its 50-mile PRB crude oil gathering system to Silver Creek (formerly owned by Outrigger Energy). Tallgrass and Silver Creek expect to close the formation of the joint venture and the sale of Tallgrass Crude Gathering, LLC later this month.

According to the company, the transaction gives Silver Creek an immediate presence in the PRB and provides a strategic footprint as it constructs additional gathering to cover the core of the PRB. The acquired gathering system alongside the newly constructed Silver Creek gathering system will deliver into the Silver Creek Midway Terminal, which will deliver barrels to Iron Horse.

As part of the joint venture, Tallgrass has agreed to contribute approximately 40 miles of pipe from Labonte, Wyoming to Guernsey, Wyoming. This pipe is currently owned by Tallgrass Interstate Gas Transmission, LLC, and is undergoing abandonment from gas service. Tallgrass will be a 75% owner and will operate the approximately 80-mile, 16” pipeline, which consists of 40-miles of new build and the 40-miles of gas-to-oil conversion pipe. Silver Creek said that it will own the remaining 25%.

Silver Creek Partners, Tallgrass Energy Will Transport PRB Crude to Wyoming

Tallgrass Energy Pipeline System (Partial Map)

Iron Horse is anticipated to be in-service Q1 2019 with an expected initial capacity of about 100,000 BOPD with significant available expansion capacity. After conversations with both producers and marketers in the PRB, the parties anticipate a significant amount of the Iron Horse’s initial capacity will be contracted prior to the pipeline being placed into service, and depending on commitments obtained, capacity could be expanded above the 100,000 BOPD currently planned.

“Silver Creek is extremely excited to work with Tallgrass in the PRB. Their current presence in the basin and long-haul crude transport capabilities bring a competitive advantage to Silver Creek as we work to fully build out our gathering system. Collectively, we will be able to provide optimal midstream service solutions for producers in the Powder River Basin,” said Silver Creek Founder and CEO J. Patrick Barley.

“Silver Creek brings a best-in-class oil gathering management team to the PRB,” said Tallgrass CCO Matt Sheehy. “Their extensive customer relationships and focus on customer service make them an ideal partner for Tallgrass. Iron Horse Pipeline will quickly become an important path to bring Wyoming production into Guernsey and onto Pony Express.”

Tallgrass anticipates that it will invest approximately $150 million into this initiative, including its proportionate share of the cost to construct the Iron Horse Pipeline and the new Tallgrass Guernsey Terminal, but excluding the proceeds from the sale of its PRB gathering system.

BLM issues draft EIS for Converse County mega-drilling project

In 2016, a group of E&Ps—Anadarko Petroleum Company (ticker: APC), Chesapeake Energy Corporation (ticker: CHK), EOG Resources, Inc., (ticker: EOG), Devon Energy (ticker: DVN) and SM Energy (ticker: SM)—proposed to drill approximately 5,000 oil and natural gas wells on 1,500 well pads in northern Converse County encompassing approximately 1.5 million acres over a 10-year period.

The project area is located entirely in Converse County, Wyoming. The majority of the federal mineral estate (808,154 acres) is located below private surface lands, in a “split-estate” situation.

According to its development plan, the group of operators would drill wells at an average rate of approximately 500 wells per year for 10 years.

Prospective zones for the Converse County Oil and Gas Project include (but are not limited to) the Sussex, Shannon, Frontier, Niobrara, Muddy, Mowry, Parkman, Tea Pot, Tekla, and Turner. To the extent possible, the operator group intends to conduct drilling and development operations within the project area on a year-round basis in order to maximize the use of horizontal development from multi-well pads.

The proposed project also calls for installation of 750 miles of cross-country gas pipelines and 500 miles of main trunk pipelines.

In January, the Bureau of Land Management (BLM) released the draft environmental impact statement for the Converse County oil and gas project, which the Bureau said “has the potential to contribute about 94 million barrels of oil and 5.8 Tcf of natural gas to America’s independent energy reserves, and 8,000 jobs with approximately $18-$28 billion in revenues and economic activity.”

The draft EIS is in the 45-day public comment period.

Silver Creek Partners, Tallgrass Energy Will Transport PRB Crude to Wyoming

Proposed oil and gas drilling project area outlined in yellow.

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