Noble Midstream Partners LP (NBLX) (the “Partnership” or “Noble Midstream”) today announced it has exercised and closed its option with EPIC Midstream Holdings, LP (EPIC) to acquire a 15% equity interest in the EPIC Y-Grade Pipeline. In addition, Noble Energy, Inc. (NBL) has assigned Noble Midstream its option to acquire a 30% equity interest in the EPIC Crude Oil Pipeline and Noble Midstream has exercised its option with EPIC. Closing of the Partnership’s equity interest in the EPIC Crude Oil Pipeline is anticipated in February 2019 and subject to certain conditions precedent.
Both pipelines are anticipated to be funded through project level debt as well as equity commitments from project partners. Noble Midstream’s total cash equity investment is anticipated to be approximately $165 to $180 million for the EPIC Y-Grade Pipeline and $330 to $350 million for the EPIC Crude Oil Pipeline. Included in these amounts, a $109 million catch-up payment for the EPIC Y-Grade Pipeline was contributed at close and approximately $100 to $110 million is anticipated to be paid for the EPIC Crude Oil Pipeline at close. Noble Midstream intends to fund its equity investment with its revolving credit facility and is exploring a private co-investment in the EPIC Crude Oil Pipeline.
The Partnership anticipates significant value creation for unitholders from the EPIC Crude Oil Pipeline and EPIC Y-Grade Pipeline Projects:
- Participation in these ventures reinforces the Partnership’s target of 50% Permian EBITDA contribution by the end of 2020
- The addition of meaningful Permian long-haul transportation to the portfolio provides a future source of stable and predictable cash flows
- Both investments are expected to have robust economics, with returns and build multiples that compete with the very best opportunities in the Partnership’s portfolio
- Noble Midstream anticipates a temporary but prudent increase in leverage, with a clear pathway to achieving long-term targets as these projects begin contributing meaningfully to the Partnership. The opportunities will be financed without the issuance of Partnership equity
- The projects are underpinned by agreements from high-quality customers
- EPIC Crude Oil Pipeline
- Minimum volume commitments (MVC’s) from experienced Permian marketers
- Acreage dedications from several major Permian producers as strategic partners with meaningful pipeline ownership
- Complementary to our existing infield and intermediate gathering footprint, with origination points at both the Crane and Wink hubs via our 50/50 Advantage Pipeline joint venture and our 50/50 joint venture with Salt Creek LLC, which is anticipated to close in February 2019
- EPIC Y-Grade Pipeline
- Anchor MVC from Major supported by multiple plant and acreage dedications from leading Permian processors and producers
- Strategically advantaged fractionation capacity in Corpus Christi-area, providing a local source for increasing purity product demand
- EPIC Crude Oil Pipeline
“We are excited to work with our new partners and participate in the EPIC projects, capitalizing on the growing demand for crude oil and NGL takeaway and export capability from the Permian Basin. These additions are complementary to our existing portfolio, enhance our customer diversification, and will add a stable and high-quality source of cash flow from a premier U.S. unconventional basin. In addition, Noble Midstream is uniquely positioned to realize value across the entirety of the crude oil value chain, from our wellhead gathering facilities in the Delaware Basin to long-haul transportation to the Gulf Coast,” stated Terry R. Gerhart, Chief Executive Officer of the general partner of Noble Midstream.
EPIC Y-Grade and EPIC Crude Projects
The 24-inch EPIC Y-Grade Pipeline is a ~700-mile pipeline linking NGL reserves in the Permian and Eagle Ford to Gulf Coast refiners, petrochemical companies, and export markets. The pipeline will have a throughput capacity of approximately 440 MBbl/d with multiple origin points. The project scope includes approximately 180 MBbl/d of initial fractionation capacity, scalable to provide maximum flexibility, as well as associated purity product take-away in Chorpus Christi. Construction of the third and final phase of the EPIC Y-Grade Pipeline from Benedum Plant to Robstown, Texas is approximately 60% complete.
The 30-inch EPIC Crude Oil Pipeline has a current capacity of 590 MBbl/d from the Delaware Basin to the Gulf Coast. With the installation of additional pumps and storage, EPIC can increase the 30-inch capacity to approximately 900 MBbl/d. Construction of the 30” pipeline is expected to commence in February, and significant construction synergies between the Crude and Y-Grade pipelines are anticipated.
Because of high customer demand for crude oil transportation, EPIC announced in October 2018 the decision to utilize the third and final phase of its EPIC Y-Grade Pipeline from Crane, Texas to Corpus Christi, Texas for crude oil service while the EPIC Crude Oil Pipeline and EPIC NGL fractionator remains under construction. Interim service remains on track for startup in the third quarter of 2019. The EPIC Y-Grade Pipeline will convert back to NGL service at completion of the EPIC Crude Oil Pipeline in January of 2020.
About Noble Midstream Partners
Noble Midstream is a growth-oriented master limited partnership formed by Noble Energy, to own, operate, develop and acquire domestic midstream infrastructure assets. Noble Midstream currently provides crude oil, natural gas, and water-related midstream services in the DJ Basin in Colorado and the Delaware Basin in Texas. For more information, please visit www.nblmidstream.com
About EPIC Pipeline
EPIC was formed in 2017 to build, own, and operate midstream infrastructure in both the Permian and Eagle Ford Basins. EPIC’s first two projects, the EPIC Crude Oil Pipeline and the EPIC NGL Pipeline, will transport crude and NGL across Texas for delivery into the Corpus Christi market. The EPIC Pipelines are backed by capital commitments from funds managed by the Private Equity Group of Ares Management, L.P. (ARES). For more information, visit www.epicmid.com.
This news release contains certain “forward-looking statements” within the meaning of federal securities law. Words such as “anticipates”, “believes”, “expects”, “intends”, “will”, “should”, “may”, “estimates”, and similar expressions may be used to identify forward-looking statements. Forward-looking statements are not statements of historical fact and reflect the Partnership’s current views about future events. No assurances can be given that the forward-looking statements contained in this news release will occur as projected and actual results may differ materially from those projected. Forward-looking statements are based on current expectations, estimates and assumptions that involve a number of risks and uncertainties that could cause actual results to differ materially from those projected. These risks include, without limitation, our customers’ ability to meet their drilling and development plans, changes in general economic conditions, competitive conditions in the Partnership’s industry, actions taken by third-party operators, gatherers, processors and transporters, the demand for crude oil and natural gas gathering and processing services, the Partnership’s ability to successfully implement its business plan, the Partnership’s ability to complete internal growth projects on time and on budget, the price and availability of debt and equity financing, the availability and price of crude oil and natural gas to the consumer compared to the price of alternative and competing fuels, and other risks inherent in the Partnership’s business, including those described under “Risk Factors” and “Forward-Looking Statements” in the Partnership’s most recent Annual Report on Form 10-K and in other reports we file with the Securities and Exchange Commission. These reports are also available from the Partnership’s office or website, www.nblmidstream.com. Forward-looking statements are based on the estimates and opinions of management at the time the statements are made. Noble Midstream does not assume any obligation to update forward-looking statements should circumstances, management’s estimates, or opinions change.