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DCP Midstream combines with MLP to form largest US NGL producer, gas processor
HOUSTON, January 4, 2017 (PCW) – DCP Midstream on Wednesday announced it was combining with its master limited partnership, DCP Midstream Partners, effectively creating the US’ largest NGL producer and natural gas processor.
The combined company is valued at $11 billion. DCP Midstream is a 50/50 joint venture between Phillips 66 and Spectra Energy. As part of the deal, DCP Midstream LLC will pay DCP Midstream Partners some $424 million in cash and receive 31.1 million DCP Midstream Partners units.
The move was largely done to simplify the two companies’ corporate structures, a similar tactic recently employed by the likes of Energy Transfer Partners and Sunoco Logistics in order to reduce operating expenses.
The combined company’s major footprint is in Colorado’s DJ Basin and the Midcontinent.
The combined company announced plans to expand the takeaway capacity of the Sand Hills NGL pipeline, which currently transports 85,000 b/d. A 30% increase to 365,000 b/d through the addition of four pump stations and a pipeline loop is expected to go into service in 4Q 2017. The estimated cost is $70 million. Sand Hills moves liquids from the Permian and Delaware basins to Mont Belvieu.
It will also build a new 200,000 Mcf/d natural gas processing plant, Mewbourn 3, in the DJ Basin, making it the company’s 10th such facility in the region. It has a projected in-service date of end-2018. Another 200,000 Mcf/d plant is in the works as the newly-combined company works with several producers in the region. DCP is targeting an in-service date of mid-2019 for this second planned plant. These two facilities would increase processing capacity by 50% to 1.2 Bcf/d. -- Samantha Hartke