Enterprise buying gas gathering lines from M2 for $1.2 billion

Enterprise Products Partners L.P. said on April 1 that it has agreed to purchase two natural gas gathering and treating systems from M2 Midstream for about $1.2 billion.
The transaction for the State Line system and the Fairplay system is expected to close in early May 2010 and be accretive to Enterprise's distributable cash flow in the second half of 2010.
The systems are located in Northwest Louisiana and East Texas, and gather natural gas produced from the Haynesville/Bossier Shales and the Cotton Valley and Taylor Sands formations. The company noted that both systems are supported by long-term acreage dedications and volumetric commitments from producers.
In late February, Enterprise Products announced the completion of its $3.3 billion merger with TEPPCO partners, L.P., an energy logistics partnership. With an enterprise value of about $30 billion, 48,000 miles of pipelines and market capitalization of $18 billion, the combined entity has become the nation's largest publicly traded partnership.
According to Enterprise, the two natural gas systems that it has agreed to acquire complement its downstream assets and provide multiple opportunities for synergies, including a long-term gathering conduit for the company's Haynesville Extension pipeline and Enterprise Texas pipeline, as well as natural gas liquid or NGL volumes for the company's Panola pipeline and downstream Mont Belviue fractionation, storage and distribution complex.
The State Line system, which began operations in February 2009, is located in Desoto and Caddo Parishes, La., and Panola County, Texas. The system includes 138 miles of natural gas pipelines with a capacity of approximately 400 million cubic feet per day or Mmcfd, and two treating facilities. The system, currently gathering about 260 Mmcfd, will almost triple its capacity to 700 MMcfd after a 50-mile expansion of the system that is expected to be completed in June 2010.
The State Line system will interconnect with the 42-inch Haynesville Extension of Enterprise's Acadian natural gas pipeline system. The Haynesville Extension, currently under construction, is expected to be completed in the third quarter of 2011. Enterprise noted that the State Line system, once connected to the Haynesville Extension, can be further expanded to 1.2 billion cubic feet per day for a nominal cost.
In late 2008, M2 Midstream initiated the State Line Gathering System, a greenfield project, to serve the Haynesville Shale play in DeSoto Parish, La. During 2009, the company added over 90 miles of pipeline to the system and three processing plants.
The Fairplay system, located in Rusk, Panola, Gregg and Nacogdoches counties in Texas, includes 249 miles of natural gas pipelines. This includes about 62 miles leased from third parties, with a capacity of approximately 285 MMcfd, and is currently gathering approximately 180 MMcfd. This system is expected to be connected to the Enterprise Texas Pipeline system by the first quarter of 2011.
The Fairplay system was acquired by M2 Midstream in December 2007 and began a significant capital improvement and expansion during 2008.