Kinder Morgan, Inc. has announced that KMI will acquire Hiland Partners from its founder, Harold Hamm, and certain Hamm family trusts, for a total purchase price of approximately US$3 billion, including the assumption of debt.
Hiland’s assets, which are mostly fee based, consist of crude oil gathering and transportation pipelines and gas gathering and processing systems, primarily serving production from the Bakken Formation in North Dakota and Montana, USA. The transaction creates a premier midstream platform for KMI in the Bakken with a significant amount of acreage dedicated under long-term gathering agreements. Hiland’s customers include Continental Resources, Inc. (Continental), Oasis Petroleum Inc., XTO Energy Inc., Whiting Petroleum Corporation and Hess Corporation, among others.
Based on its long-term forecast for Hiland, KMI expects that the multiple of EBITDA paid for Hiland, including future growth capital investments, will decline to approximately 10 times by 2018. The acquisition is expected to be modestly accretive to KMI’s cash available to pay dividends in 2015 and 2016 and approximately six to seven cents accretive beginning in 2017.
KMI Chairman and CEO, Richard D. Kinder, stated:
“We are delighted to establish a substantial midstream footprint in one of the most prolific oil producing basins in the United States. Hiland’s systems serve some of the Bakken’s largest and most successful producers, including Continental. We look forward to continuing to provide high quality midstream services to these producers and pursuing incremental growth opportunities in the basin.”
“Kinder Morgan’s projections for Hiland are reflective of the current commodity price environment. While Hiland’s gathering systems serve some of the Bakken’s and North America’s most economic acreage, the projections incorporate announced reductions in drilling activity by Hiland’s customers. Although Hiland’s cash flow is largely fee-based, our projections are based on commodity prices consistent with the current forward curve for the portion that is sensitive to commodity prices.”
Kinder Morgan anticipates retaining nearly all of Hiland’s approximately 430 employees and maintaining KMI’s already significant presence in Oklahoma.