Inergy Midstream LP (NRGM:US) agreed to buy closely held Rangeland Energy LLC for $425 million in cash, giving the partnership access to North Dakota’s fast-growing Bakken field.
Rangeland owns the Colt Hub, a delivery point for crude from the Bakken Shale with the capacity to handle 190,000 barrels a day, according to a statement today. It’s the first major crude project and the largest purchase ever for Kansas City, Missouri-based Inergy, which owns natural gas and natural gas liquids storage and transportation in the U.S. and Canada, according to its website.
Unlike other hubs in the area, which are owned by producers, Colt takes oil from all companies, said Bill Waldrip, managing director for private-equity firm EnCap Flatrock Midstream, which backed Sugar Land, Texas-based Rangeland. “It’s kind of a different concept.”
North Dakota’s oil production grew to 701,000 barrels a day in August, from less than 100,000 in 2005, according to the North Dakota Industrial Commission. Oil from the field trades at a discount, in part because there aren’t enough ways to bring the crude to refiners.
Rangeland’s hub, which opened in May in Williams County, North Dakota, transfers oil onto trains as much as 120 cars long for shipment. The system also includes a 21-mile (34-kilometer) pipeline that connects to systems owned by Enbridge Inc. (ENB) and Tesoro Corp. (TSO:US)
Inergy will fund the purchase by selling $225 million of common units in a private placement and from unsecured debt financing.
Rangeland, formed in 2009, developed the idea for the terminal and built it quickly, allowing EnCap Flatrock to make a fast return on its investment, Waldrip said. He declined to give the size of EnCap Flatrock’s original investment.
Citigroup Inc. advised Rangeland on the sale, expected to close in December. Jones Day provided legal advice. Jefferies Group Inc. advised Inergy.
Inergy rose (NRGM:US) 4.6 percent to $23.76 at 1:39 p.m. in New York. The partnership has gained 25 percent this year. Inergy LP (NRGY:US), which owns 74 percent of Inergy Midstream, rose 4.9 percent to $19.97. The companies were the top performers on the 82-member Tortoise MLP Index (TMLP) today.
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