Midstream - Pipelines | Deals - Joint Ventures

Noble, Greenfield Midstream Report Update to DJ Basin JV

Share Print Bookmark    |    Thursday,August 29,2019

Noble Midstream Partners LP and Greenfield Midstream LLC provided a commercial and business development update for its Black Diamond Gathering LLC joint venture. Black Diamond provides crude oil gathering and storage services to producers in the Denver Julesburg Basin (“the DJ Basin”).

• Black Diamond has entered into a new strategic relationship with Saddlehorn Pipeline Company, LLC, including an option for up to a 20% ownership in Saddlehorn

• Black Diamond added a long-term oil gathering dedication from Verdad Resources LLC , increasing Black Diamond dedicated acres by approximately 85,000 acres, or 54%.

Saddlehorn Investment Option

As part of such strategic relationship, Black Diamond and Noble Energy Inc. made commitments during Saddlehorn’s recent open season. Black Diamond’s investment option expires in April 2020.

The Saddlehorn Pipeline, which is jointly owned by affiliates of Magellan Midstream Partners, L.P. (NYSE: MMP) (“Magellan”), Plains All American Pipeline, L.P. (NYSE: PAA) (“Plains”) and Western Midstream Partners, LP (NYSE: WES) (“WES”), is currently capable of transporting approximately 190 thousand barrels per day (MBbl/d) of crude oil and condensate from the DJ and Powder River Basins to storage facilities in Cushing, Oklahoma owned by Magellan and Plains. With the recent successful open season, the Saddlehorn Pipeline will be expanded by 100 MBbl/d, to a new total capacity of 290 MBbl/d. The higher capacity is expected to be available in late 2020 following the addition of incremental pumping and storage capabilities. Magellan serves as operator of the Saddlehorn pipeline.

Upon an option exercise by Black Diamond, Magellan and Plains would each sell-down their equity interests in the Saddlehorn Pipeline to Black Diamond on an equal 10% basis while WES would retain its 20% equity ownership.

Commenting on the announcement, Noble Midstream Chief Executive Officer Brent Smolik said, “Saddlehorn is an important long-haul outlet from the DJ and Powder River Basins with premier midstream equity partners and commitments from high-quality producers. This opportunity is a natural expansion of Black Diamond’s strategic footprint, with the ability to realize economics further down the crude oil value chain while enhancing the all-in value proposition for our customers. In addition, the new open season TSAs signed by Noble Energy and Black Diamond will include a tariff reduction to transport barrels to Cushing. We are excited by another potential long-haul pipeline investment and believe this opportunity reflects our strategic advantage and differentiated playbook for long-term growth and value creation.”

Long-Term Oil Gathering Dedication to Black Diamond

In addition, Black Diamond has secured a 15-year oil gathering dedication from Verdad Resources. The dedication encompasses approximately 85,000 acres and more than 750 potential drilling locations in the DJ Basin in southern Weld County, Colorado. This increases the total acreage dedicated to the Black Diamond system to approximately 243,000 acres.

Seven rigs are currently running on the Black Diamond dedicated acreage, including one rig on the Verdad acreage. Initial Verdad well connections are anticipated in early 2020. Black Diamond anticipates modest capital requirements in 2019 from the new gathering opportunity which can be absorbed within existing 2019 capital guidance provided at the Partnership’s second quarter earnings due to sustainable cost savings achieved this year.

“I’m extremely pleased to add a new customer and meaningful acreage dedication to our system. This is another testament to Black Diamond’s strong competitive position in the DJ Basin as well as the differentiated value proposition we provide our customers. These positive commercial developments enhance the resiliency and long-term potential of this premier oil gathering platform,” said Smolik.

Noble Midstream operates Black Diamond, which includes a large-scale integrated crude oil gathering system in the DJ Basin, consisting of approximately 240 miles of pipeline in operation, 300 MBbl/d delivery capacity and 390 MBbl/d crude oil storage capacity. The system is connected to every major takeaway pipeline in the DJ Basin, including the White Cliffs Pipeline, the Saddlehorn Pipeline, the Grand Mesa Pipeline, and the Pony Express Pipeline. The Partnership’s 54.4% ownership of Black Diamond is held through its wholly owned subsidiary, Laramie River DevCo LP. Greenfield Midstream owns 45.6% of Black Diamond.