Hess announces Bakken Midstream Joint Venture valued at $5.35 Billion
Hess Corporation has recently announced that it has agreed to sell a 50 percent interest in its Bakken midstream assets to Global Infrastructure Partners, a leading global infrastructure investor with an extensive midstream energy investment track record, for cash consideration of $2.675 billion.
Hess and Global Infrastructure Partners will create a premier midstream joint venture – Hess Infrastructure Partners. Upon closing, the joint venture will incur $600 million of debt through a 5-year Term Loan A facility with proceeds distributed equally to both partners, resulting in total after-tax cash proceeds, net to Hess, of $3.0 billion. In addition the joint venture will have independent access to capital including a $400 million 5-year Senior Revolving Credit Facility, which is fully committed. The joint venture upon closing plans to continue to pursue a proposed initial public offering (IPO) of Hess Midstream Partners LP common units.
John Hess, Chief Executive Officer of Hess Corporation, said:
“This transaction delivers significant and immediate value to our shareholders. The joint venture with its strategically located assets will be one of the largest midstream operators in the Bakken. By capitalizing on the financial strength and midstream energy experience of Global Infrastructure Partners, the joint venture will be in a strong position to fund future energy infrastructure investments and continue to grow its midstream business.”
With the proceeds from this transaction, plus cash on hand and an untapped $4 billion revolving credit facility, Hess will have a highly advantaged liquidity position compared to its peer group. Consistent with its financial strategy, the company will use proceeds from this transaction to preserve the strength of its balance sheet in the current oil price environment, provide additional financial flexibility for future growth opportunities and continue to repurchase stock on a disciplined basis.
The transaction is subject to customary closing conditions and is expected to be completed early in the third quarter of 2015. The Hess midstream assets to be included in the joint venture are:
- Natural gas processing plant in Tioga, North Dakota;
- Rail loading terminal in Tioga and associated rail cars;
- Crude oil truck and pipeline terminal in Williams County, North Dakota;
- Propane storage cavern and rail and truck transloading facility in Mentor, Minnesota; and
- Crude oil and natural gas gathering systems in North Dakota.
Hess expects midstream segment EBITDA for the twelve months ending March 31, 2016 to be $290 million to $300 million. Hess also expects capital expenditures to be funded by the joint venture on a 100 percent basis for the same period to be $325 million to $350 million.
