El Paso, KKR Form Midstream JV
El Paso Midstream Group, Inc., a subsidiary of El Paso Corp., and Kohlberg Kravis Roberts & Co. (together with its affiliates, "KKR") on Tuesday announced that El Paso and KKR have executed agreements to create a new midstream joint venture. El Paso Midstream will operate the new venture, and they will each own a 50 percent interest. The joint venture is consistent with El Paso's commitment to develop midstream opportunities in a balance sheet-friendly manner. The transaction is expected to close by December 31, 2010.
Under the terms of the agreement, KKR will acquire a 50-percent interest in El Paso's Altamont gathering and processing assets for $125 million. The Altamont gathering and processing assets include approximately 800 miles of pipelines, 3,800 barrels per day of fractionation capacity and 40 million cubic feet per day of natural gas processing capacity. These assets serve El Paso Exploration & Production Company, as well as third-party producers. The Altamont field is one of El Paso's core oil programs, and El Paso expects to increase its drilling activity from a current two-rig program to three rigs in 2011 and six rigs by 2013. The partnership expects that there will be opportunities to expand the Altamont midstream assets given El Paso's and others' drilling plans.
In addition, KKR and El Paso will each invest up to approximately $500 million in future midstream projects including, but not limited to, the Marcellus Ethane Pipeline System (MEPS) in the Marcellus shale and the Camino Real Pipeline in the Eagle Ford shale. El Paso previously announced that it is partnering with Spectra Energy to develop the MEPS project, and expects to have a partner for the Camino Real Pipeline project.
"We are very pleased to partner with KKR as we develop our midstream business," said Mark Leland, president, El Paso Midstream Group. "KKR is a very successful and experienced investor in energy-related infrastructure, and we believe that the combination of our two companies creates a strong competitor in the midstream space."
"The emergence of unconventional resources is driving a need for significant investment in midstream infrastructure in the U.S., and El Paso's talented team is developing projects that are very well-positioned to meet these needs. El Paso is a world class pipeline operator and developer, and we are thrilled to be partnering with them to build a leading midstream business," Marc Lipschultz, the global head of KKR's Energy and Infrastructure business, said.
El Paso Corp. owns North America's largest interstate natural gas pipeline system and is one of North America's largest independent natural gas producers. El Paso has interests in more than 42,000 miles of interstate natural gas pipeline serving all of the major supply regions and leading markets across the U.S.
Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a leading global alternative asset manager with $55.5 billion in assets under management as of September 30, 2010. With over 650 people and 14 offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes.