Williams Partners (WPZ), Crestwood EP (CEQP), Chesapeake (CHK) Enter Restructuring Agreement for Powder River Basin Services
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Williams Partners L.P. (NYSE: WPZ) and Crestwood Equity Partners L.P. (NYSE: CEQP), as 50/50 joint venture partners in the Bucking Horse natural gas processing plant and Jackalope Gas Gathering System, announced they have signed an agreement with Chesapeake Energy Corporation (NYSE: CHK) to restructure natural gas gathering and processing services in Wyoming’s Powder River Basin.
The restructured services are expected to replace the current cost-of-service arrangement and improve economics to support a ramp-up in near-term development and production activity and incentivize long-term development across an expanded area of dedication in the region.
“The restructuring will create a win-win for the joint venture and for Chesapeake that aligns interests for mutual growth,” said Walter Bennett, senior vice president, Williams’ West operating area.
“This new simplified fee structure will promote production growth and improve the economics on both the drilling and midstream operations,” adds Heath Deneke, Crestwood’s chief operating officer and pipeline group president.
The restructured terms of service are expected to include minimum annual revenue guarantees that support the transition to a new fixed-fee structure over the next five to seven years.
“I’m pleased to be aligned with our midstream partners and look forward to developing the resources in the Powder River,” said Doug Lawler, Chesapeake’s president and chief executive officer. “This new agreement is a result of the positive relationships we have built with Williams Partners and Crestwood and our shared desire to improve the economics of this play. The new attractive fixed-fee structure will allow Chesapeake to accelerate our development plans, improve margins and achieve the full potential of our Powder River acreage.”
The Bucking Horse plant has the capacity to process 120 million cubic feet (MMcf) of natural gas per day and the Jackalope gathering system includes approximately 184 miles of low pressure gathering pipelines.
Subject to board approvals of the definitive agreement, the restructured services are to become effective Jan. 1, 2017 for a 20-year term.
Chesapeake will discuss the agreement and its development plans in the Niobrara during its Analyst Day on Thursday, Oct. 20 at 9 a.m. CDT.
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