"We are very excited to have the opportunity to build the needed additional pipeline capacity and provide market outlets for the rapidly growing Barnett Shale production," said Barry E. Davis, President and Chief Executive Officer of Crosstex. "Chief Oil & Gas and other producers have done a great job in developing the largest gas field in Texas. The project is consistent with our strategy of focusing on producer relationships and providing the services required to get their gas to market. It also demonstrates our focus on grass roots construction projects in addition to acquisitions and opens a new core area in which we can grow our asset base and provide services."
Based on commitments from Chief Oil & Gas LLC and other producers, Crosstex will begin the construction of a 122-mile, 24-inch diameter pipeline from a point just north of Fort Worth, Texas (Alliance Airport area) to interconnect with Natural Gas Pipeline of America, Houston Pipeline Company, and Kinder Morgan Texas in Lamar County, Texas. The pipeline will have initial capacity of 250 million cubic feet of natural gas per day (MMcf/d.) Crosstex also has commitments from producers to construct an additional 11 miles of gathering pipeline to interconnect supply from the Tarrant County area into the North Texas Pipeline. The construction cost is estimated at $98 million and is expected to be completed by January 2006. Expected first year cash flow to the Partnership from the project is estimated to be $17.4 million. Crosstex has begun the acquisition of rights-of-way and will initiate actual construction of the pipeline by late summer of this year.
"Crosstex's North Texas Pipeline brings access to new market outlets from the Barnett Shale play, allowing Chief and other producers to focus on executing our exploration and development strategy," said Trevor Rees-Jones, Chairman and Chief Executive Officer of Chief Oil & Gas.
Crosstex is in discussion with companies that represent significant additional production that is available to be committed to the pipeline. With such additional volumes, compression could be added to expand the capacity up to a maximum of 375 MMcf/d.
"We are also pleased to announce the hiring of Danny Thompson, who brings all the right experience to manage project construction," said Barry Davis. "Danny has spent over 32 years in the midstream natural gas business, most recently as Vice President of Operations and Engineering for Cantera Natural Gas LLC. His experience varies from hands-on engineering, design, operation, and construction of gas processing plants and pipelines, to business development and gas marketing, as well as managing large operating facilities and construction projects."
The Partnership expects to fund initial construction expenditures for the project from its revolving bank facility. As the project progresses, these borrowings will be refinanced with a combination of equity and fixed-rate term debt. Assuming long-term financing structured 50-percent debt and 50-percent equity, Crosstex estimates the first year accretion to the Partnership of 13% and to the Corporation of 30%.
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