Enterprise Products Partners L.P. (EPD), a leading master limited partnership (MLP), is buying two natural gas gathering and treating systems for approximately $1.2 billion from M2 Midstream LLC (“Momentum”). The two systems are State Line system and the Fairplay system.
Located in De Soto and Caddo parishes, Louisiana, and Panola County, Texas, the State Line system consists of 138 miles of natural gas pipeline, with a daily capacity of approximately 400 million cubic feet (MMcf) and two treating facilities. This will be increased to 700 MMcf upon completion of 50-mile expansion of this system in June 2010. The current gathering capacity is 260 MMcf/d.
On the other hand, the Fairplay system is 249 miles of natural gas pipeline, with a daily capacity of approximately 285 MMcf of gas.
Located in Rusk, Panola, Gregg and Nacogdoches counties, Texas, this system currently gathers approximately 180 MMcf/d of gas. Both the systems are supported by long-term acreage dedications and supply commitments from producers. This deal is expected to be completed in early May 2010.
We believe that Enterprise’s solid financial position will help to develop new organic growth opportunities that will expand its integrated system. In addition to organic growth, the partnership is quite active on the acquisition front. Apart from this acquisition, Enterprise had also acquired Teppco Partners last year.
We view Enterprise as a core holding in an MLP portfolio, given its strong balance sheet and liquidity position. The partnership is one of the largest fully integrated midstream service providers with a positive long-term outlook, given its significant geographic and business diversity.
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