DTE Midstream, a unit of Michigan utility DTE Energy, said Friday it agreed to acquire a natural gas gathering system and pipeline in Louisiana’s Haynesville shale from private equity-backed Momentum Midstream and Indigo Natural Resources for $2.25 billion in cash.
The buyer also agreed to pay the seller $400 million when the 150-mile gathering pipeline that’s under construction is completed, which is expected in the second half of next year.
Reuters broke the story Thursday saying the deal was valued at around $2.5 billion, citing sources. The parties didn’t respond for requests to comment.
The purchase comes at a busy time for midstream deals, including Golden Gate’s $600 million sale of Hillstone to NGL Energy Partners and Energy Transfer’s $5.1 billion purchase of SemGroup, both in September, and Plains All American’s and Magellan’s $1.438 billion sale of a half-stake in BridgeTex Pipeline to pension fund manager Omers in August.
DTE Energy expects to close the transaction in the fourth quarter if it clears regulators.
Three law firms handled the deal out of Houston.
Shearman & Sterling represented DTE, including partners Omar Samji, Sarah McLean and Todd Lowther and associates Kelli Sims, Alix Charles and Douglas Goldstein.
Vinson & Elkins counseled Momentum Midstream with a corporate team led by partner Danielle Patterson with partner Keith Fullenweider, senior associate Jeannie Poland and associate Torie Berkowitz.
Also advising were partners Todd Way and John Lynch and associates Brian Russell and Miron Klimkowski on tax; partner Sean Becker and senior associate Christie Alcalá on labor/employment; partners Stephen Jacobson and Brian Bloom and senior associate Mary Daniel Morgan on executive compensation/benefits; partner Larry Nettles on environmental; and counsel Damien Lyster on energy regulatory.
Others on the team were counsel Sarah Mitchell (insurance); associate Caitlin Snelson (finance); partners Doug Bland and Mark Brasher and associates Stephanie Coco, Megan Menniti, Jack Moxon and Tukeni Obasi; and senior associate Austin March and associate Ted Belden (corporate). Other attorneys pitched in from the firm’s Washington, D.C., New York and London offices.
Kirkland & Ellis assisted Indigo, including corporate partners John Pitts and Cyril Jones and associates Josh Abbotoy and Daniel Cadis and capital markets partners Matt Pacey, Brooks Antweil and Sara-Ashley Moreno.
Dechert is assisting with DTE Energy’s Hart-Scott-Rodino filing.
Barclays (Nelson Mabry) is providing financial advice to DTE Energy while Jefferies (Peter Bowden, Brian Bravo and Chris Howey) and Credit Suisse (Tim Perry and Brian McCabe) are financial advisors to Momentum.
Momentum Midstream is backed by Yorktown Partners, Ridgemont Equity Partners, Magnetar Capital, GSO Capital Partners and Trilantic Capital Partners.
Indigo has received funding from Trilantic, Yorktown and Ridgemont as well as the Martin Cos. Its general counsel is Robert W. Hunt Jr., who joined the company in 2016 after working at Cobalt International Energy as associate general counsel. The University of Texas Law-trained attorney started his legal career at V&E.
The main assets gather natural gas produced in the Haynesville and access multiple major downstream pipelines, including those serving the Gulf Coast. Indigo is the primary supplier to the system.
DTE Midstream said the assets in Louisiana’s highly-economic Haynesville shale will enhance its business and provide access to growing Gulf Coast markets. It added that the immediate and highly accretive transaction accelerates achievement of its five-year investment plan and will provide strong returns backed by long-term contracts with a well-capitalized producer.
DTE Energy said it reaffirmed its commitment to a long-term business mix of 70% to 75% utility.
DTE Energy CEO and president Jerry Norcia said in a press release that the acquisition is highly accretive, has world-class resources and access to large markets and is in the early- to mid-cycle development phase. “It checks all of our boxes,” he added.
Norcia added that DTE’s non-utility operations continue to grow, perform well and fit nicely into our planned utility and non-utility mix.
”This acquisition significantly enhances the strength and diversity of DTE Midstream, adding premium assets in one of the fastest growing and best positioned U.S. shale formations.”
DTE Midstream also purchased the Link asset from Momentum in 2016 for $1.3 billion.