Joint venture becomes part owner of pipeline moving oil to Cushing

A joint venture involving Noble Midstream Partners LP and Greenfield Midstream LLC has become a 20% owner of a major pipeline moving oil from Colorado and Wyoming to the Cushing storage farm in Oklahoma.

The $155 million deal involves the joint venture  called Black Diamond Gathering LLC which now owns 20% of the Saddlehorn Pipeline. The two companies believe the new partial ownership will increase their long-haul opportunities and give more options in shipping crude oil to Cushing.

The Saddlehorn is jointly owned by affiliates of Tulsa’s Magellan Midstream Partners, L.P., Plains All American Pipeline, L.P. and Western Midstream Partners, LP. Operated by Magellan, the line is capable of moving nearly 190,000 barrels of oil a day from the DJ and Powder River Basins to the storage facilities in Cushing.

After the first open season, operators and owners are altready planning to expand the capacity from the 100,000 barrels a day to 290,000 barrels a day. The increased capacity is expected to be in effect later this year, but at no increased capital required by Black Diamond.

With the pipeline online, Black Diamond anticipates cash distributions from Saddlehorn in the first quarter 2020.  Noble Midstream expects the acquisition to be leverage neutral to 2020 credit metrics and is expected to pay for its share of the acquisition through cash on hand and its revolving credit facility.  The effective date of the transaction was February 1, 2020; Noble Midstream 2020 guidance included the Saddlehorn acquisition and remains unchanged.

Commenting on the acquisition, Noble Midstream President and Chief Operating Officer Robin Fielder said, “This accretive transaction represents a rare opportunity to buy into a largely-contracted pipeline with high-quality producers and midstream operators. Saddlehorn strengthens the Black Diamond position as the premier full-service crude transportation provider in the DJ Basin and enhances the value proposition provided to our customers. Further, this investment is anticipated to generate high rates of return, provide diversification, and increase our exposure to stable cash flow streams.”

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, 300,000 Bbl/d delivery capacity and 390,000 Bbl/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. Greenfield Midstream owns 45.6% of Black Diamond. Noble Midstream and Greenfield Midstream jointly provide commercial efforts to bring additional producer dedications to Black Diamond Gathering and pursue expansion opportunities.

Source: Business Wire