Enterprise Products Partners has agreed to acquire Piñon Midstream, a portfolio company of Black Bay Energy Capital, in an all-cash transaction valued at $950m.
The acquisition, set to be executed by an affiliate of Enterprise Products Partners, will be debt-free.
Piñon Midstream operates in the eastern Delaware Basin, spanning New Mexico and Texas. It owns around 80km of natural gas pipelines and five three-stage compressor stations.
The company’s treating facilities have a current capacity of 270 million cubic feet per day (MMcf/d) for hydrogen sulphide and carbon dioxide. An expansion to 450MMcf/d is expected by the second half of 2025.
Piñon Midstream also has two high-capacity and deep acid gas injection (AGI) wells. Enterprise Products Partners is considering a third injection well to support up to 750MMcf/d.
Founded in 2020 with investment from Black Bay Energy Capital, Piñon Midstream offers services for sour natural gas production. These include field gathering and compression, amine treating, CO2 and H2S sequestration, sour condensate stabilisation, and high-pressure redelivery of treated natural gas.
The company operates under fee-based contracts with long-term commitments. Piñon Midstream’s monitoring, reporting, and verification (MRV) plan for CO2 sequestration at its Dark Horse Treating Facility in Lea County, New Mexico, received approval from the US Environmental Protection Agency in June 2024.
The Dark Horse Treating Facility is reported to be the largest permitted and operational acid gas injection (AGI) system in New Mexico.
Both of Piñon Midstream’s AGI wells are Devonian wells, extending to depths of around 18,000ft below the surface. These wells reach rock formations several thousand feet beneath both water aquifers and existing oil and gas-producing formations in the Delaware Basin.
Enterprise Products Partners’ general partner co-CEO A. J. Teague said: “We believe the Piñon management team has developed the premier sour natural gas treating system in the Delaware Basin. These assets accelerate our entry into this region by at least three or four years.
“These assets are highly complementary to our midstream energy system and provide us an excellent entry point into the eastern flank of the Delaware Basin for us to expand our natural gas processing footprint. Our entry will provide producers a choice for reliable and value-added processing services.”
Enterprise Products Partners estimates that the Delaware Basin has over 7,500 well locations and access to six geologic production benches. Drilling is limited due to insufficient treating and injection well capacity, and a lengthy permitting process for AGI wells, said the firm.
The acquisition is expected to close in Q4 2024, pending regulatory approvals.
Piñon Midstream engaged Piper Sandler & Co. as its financial adviser and Kirkland & Ellis as its legal adviser. On the other hand, Enterprise Products Partners was advised by Locke Lord and Sidley Austin.
