Concho, Private-Equity Investors Seek Buyer for Alpha Crude Connector
October 24 2016 - 4:40PM
Dow Jones News
The owners of a major oil pipeline system in West Texas are
looking to cash in amid a boom in deal and drilling activity in the
region's Permian Basin.
Oil explorer Concho Resources Inc. and private-equity firm
Energy Spectrum Capital have enlisted bankers to look for a buyer
of their Alpha Crude Connector LLC, according to people familiar
with the matter.
Alpha Crude, which consists of some 400 miles of pipelines
running through parts of Texas and New Mexico, could fetch as much
as $1 billion, some of the people said. That is well in excess of
the roughly $260 million invested by Concho, one of the region's
largest oil producers, and Energy Spectrum, a Dallas investment
firm, according to securities filings.
The sales effort comes amid a land grab in the Permian as oil
explorers, including Concho, have rushed to stake claim to some of
the most prolific oil fields in North America. Activity in the
barren plains of West Texas has surged at a time when low oil
prices have made drilling in many other regions uneconomical.
Since May, the number of rigs drilling in the Permian Basin has
risen 58% to 212, or roughly half of all rigs operating in the
U.S., according to Baker Hughes Inc.
Alpha Crude, which was completed in April, is capable of
transporting more than 100,000 barrels a day and has capacity to
store three times that much oil. A so-called gathering system,
Alpha Crude connects production fields to larger pipelines and a
rail terminal that deliver crude to market. It runs through the
northern part of the Delaware Basin, which is a relatively lightly
drilled part of the Permian Basin where deal activity among
exploration and production companies has been particularly
frenzied.
Concho invested in the project to support its drilling in the
area and is one of the primary users of the Alpha Crude
Connector.
Pipeline deals also have picked up recently. So far this year
there have been $14.8 billion worth of U.S. pipeline mergers and
acquisitions announced, up from $8.7 billion in all of 2015,
according to Dealogic.
The activity has been spurred in part by rising confidence in
oil prices, which have largely stabilized at around $50 a barrel
since May, and by signs that investors are returning to master
limited partnerships, or MLPs, the lightly taxed entities that own
many U.S. pipelines.
Write to Ryan Dezember at ryan.dezember@wsj.com and Dana
Mattioli at dana.mattioli@wsj.com
(END) Dow Jones Newswires
October 24, 2016 16:25 ET (20:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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