SMLP transfers Red Rock Gathering between subsidiaries

Summit Midstream Partners (SMLP) subsidiary Grand River Gathering will acquire 100% of the equity interests in Red Rock Gathering from another SMLP subsidiary for $305m.

The Red Rock drop down will be partially financed with a draw of approximately $110m under SMLP’s revolving credit facility. The balance is expected to be financed with the proceeds from a primary equity offering of SMLP common units.

SMLP president and chief executive officer Steve Newby said that the transaction will further improve the company’s presence in western Colorado’s Piceance Basin.

“With the recent commissioning of Red Rock’s new cryogenic processing plant for Black Hills Corporation and the ongoing development of natural gas gathering infrastructure for WPX Energy, our largest customer on this system, we believe that Red Rock will be a source of growth for SMLP for many years,” Newby added.

The Piceance basin is located in western Colorado and eastern Utah, and includes the liquids-rich Mesaverde formation as well as the Mancos and Niobrara shale formations. It features around 1,480 miles of low-pressure and high-pressure Red Rock pipelines.

The Red Rock natural gas gathering and processing system has 54,000 horsepower of compression and two processing plants with 50 milion cubic feet a day of processing capacity. It processes gas for more than 55 producer customers, primarily under fee-based contracts.

The transaction is expected to close before the end of the month.