Hess, Global Infrastructure Partners to Form Midstream Joint Venture in Bakken Shale

Researched by Industrial Info Resources (Sugar Land, Texas)--A new joint venture valued at $5.35 billion will create one of the largest midstream operators in the Bakken Shale region, according to Hess Corporation (NYSE:HES) (New York, New York).

Hess announced it will sell 50% interest in its Bakken midstream assets for $2.68 billion to Global Infrastructure Partners (New York, New York), in order to create the Hess Infrastructure Partners joint venture. The transaction, which is expected to close in the third quarter, will result in after-tax cash proceeds of $3 billion to Hess. The joint venture will have independent access to capital, including a $400 million, five-year credit facility. Hess would maintain operational control of the midstream assets.

The joint venture will fund $325 million to $350 million in capital expenditures for the 12-month period ending March 31, 2016, Hess said. Midstream segment earnings before interest, taxes, depreciation and amortization (EBITDA) for the same period is expected to be $290 million to $300 million, according to Hess.

Industrial Info is tracking six active Hess projects in North Dakota, with a combined total investment value of $389 million.

Hess said the joint venture will include its natural gas processing plant in Tioga, North Dakota, and associated rail cars. The Tioga facility can process 250 million standard cubic feet per day (MMSCFD) of natural gas and 60,000 barrels per day (BBL/d) of natural gas liquids. It is the largest cryogenic plant in North Dakota, according to Hess. The company said it is evaluating a capacity upgrade to 300 MMSCFD at the facility. The Tioga Rail terminal is capable of loading 140,000 BBL/d, or two unit trains.

The joint venture assets also would include Hess's 328 million-barrel storage cavern, and the rail and truck transloading facility, located in Mentor, Minnesota.

Gathering and compression systems for the joint venture have a combined throughput of 205 million cubic feet per day and 33,000 BBL/d, Hess said in a presentation Thursday. Those numbers could grow to 330 million cubic feet per day and 205,000 BBL/d to support growth in the Bakken, the company said.

Northern Border Pipeline Company, a subsidiary of TransCanada Corporation (NYSE:TRP) (Calgary, Alberta), is performing economic evaluation on a 64-mile grassroot pipeline project to move up to 295 MMSCFD of natural gas from the Hess Tioga processing plant to provide access to additional processing facilities in the Northwest Region. Kickoff of the $110 million project would take place in fourth-quarter 2016, with completion in second-quarter 2017.

For related information, see February 18, 2015, article - North Dakota Reports Record Oil & Gas Production in December.

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