DTE Energy (DTE) to Acquire Midstream Natural Gas Assets

September 26, 2016 4:16 PM EDT

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DTE Energy (NYSE: DTE) announced it will purchase midstream natural gas assets in support of the company's strategy to continue to grow and earn competitive returns for shareholders.

The agreement calls for DTE to purchase 100 percent of Appalachia Gathering System (AGS), located in Pennsylvania and West Virginia, and 40 percent of Stonewall Gas Gathering (SGG), in West Virginia, from M3 Midstream. In addition, DTE will purchase 15 percent of SGG from Vega Energy Partners. The combined purchase price for the assets to be acquired by DTE is $1.3 billion. These assets will become part of the DTE's non-utility Gas Storage and Pipeline business which currently owns and manages a network of natural gas gathering, transmission and storage facilities serving the Midwest, Ontario and Northeast markets.

These assets gather natural gas produced in the Appalachia region and provide access to multiple markets, including the Great Lakes region, through interconnections with Columbia Gas Transmission, Texas Eastern Transmission and the NEXUS Gas Transmission project currently being developed by DTE and Spectra Energy. Demand for natural gas in the Great Lakes region is expected to increase significantly, driven by coal to gas conversions for electricity generation and economic growth. The low-cost natural gas supply from the Marcellus/Utica region is expected to serve this growth and displace higher cost alternatives.

"These transactions will significantly increase our midstream presence in the Appalachian basin," said Gerry Anderson, CEO of DTE Energy. "The acquired assets are in a productive area of the Southwest Marcellus/Utica region and have expansion potential. These acquisitions align with DTE's existing strengths in managing natural gas midstream assets."

These transactions, expected to be completed in Q4 2016, will not materially change DTE's current business mix.

"The decision to purchase these assets is consistent with DTE's growth plans," said Jerry Norcia, president and COO, DTE Energy. "These two systems are complementary to our current asset portfolio and will provide synergies over time."

The new natural gas infrastructure will:

  • Complement our existing gas midstream business
  • Provide a foundation for new value creation with significant growth potential
  • Expand our footprint in the most prolific production region in the country spanning the heart of the SW Marcellus/Dry Utica
  • Provide solid economics underpinned by long term contracts and high quality reserves

Wells Fargo Securities, LLC has served as the exclusive financial advisor to DTE and Wells Fargo Bank NA has provided committed financing for the transaction.

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