DCP Midstream Partners LP has acquired an interstate natural gas liquids (NGL) pipeline system from Buckeye Partners LP for $22 million in cash.
The 350 mile pipeline originates in the Denver-Julesburg (DJ) Basin in Colorado and ends near the Conway hub in Bushton, Kansas. DCP Midstream LLC, owner of the partnership's general partner, currently utilizes the NGL pipeline as a market outlet for NGL production from certain of its plants in the DJ Basin.
DCP Midstream, the largest gatherer and processor in the DJ Basin, is investing capital to accommodate growing demand from its producers for natural gas gathering and processing capacity, including a new natural gas processing plant at its Mewbourn facility and a new large diameter natural gas gathering pipeline. DCP Midstream anticipates completing its Mewbourn plant expansion by early 2011.
The partnership expects to spend nearly $18 million in expansion capital to connect and integrate the acquired pipeline with DCP Midstream's facilities, with cash flow contributions beginning in early 2011. In conjunction with the acquisition, DCP Midstream and the partnership have agreed to a 10 year transportation agreement.
Mark Borer, president and CEO of the partnership commented, "The investment is consistent with our strategies of optimizing our asset base and executing on growth opportunities around our footprint. The 100% fee-based earnings profile of this pipeline is an excellent fit within our asset portfolio."
The $22 million NGL pipeline acquisition was financed with borrowings under the partnership's revolving credit facility.