Tallgrass Energy Receives $150 Million Settlement Payment for REX Claim

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Tallgrass Energy Partners LP received a settlement payment related to the Rockies Express Pipeline LLC. The company also announced the results of several open seasons and leadership changes related to the pipeline.

Rockies Express Pipeline LLC (REX) is a joint venture that includes a subsidiary of Tallgrass Development, LP (approximately 25 percent share); a subsidiary of Tallgrass Energy Partners (approximately 50 percent share); and P66REX LLC, a subsidiary of Phillips 66 (25 percent share). A wholly-owned subsidiary of Tallgrass Energy operates the pipeline.

REX received the cash payment of $150 million from Ultra Resources Inc. in connection with the settlement of a $303 million breach of contract claim, according to a July 12 announcement. Ultra has agreed to enter into a new seven-year firm transportation agreement with REX, starting Dec. 1, 2019, for service from west-to-east of 200 million cubic feet per day (MMcf/d), at a rate of approximately $0.37 or about $26.8 million annually.

Extending from the Rocky Mountains to Clarington, Ohio, REX is an approximately 1,700-mile natural gas transmission pipeline. The system consists of 36- and 42-in. diameter pipe with a west-to-east long-haul design capacity of up to 1.8 billion cubic feet per day (Bcf/d) and an east-to-west design capacity of 2.6 Bcf/d within the Zone 3 region. In addition, REX has 600 MMcf/d of capacity on the Overthrust Pipeline available to it pursuant to a long-term lease.

In addition, REX recently conducted several open seasons for incremental east-to-west capacity in Zone 3, totaling 180 MMcf/d from Clarington, Ohio, to delivery points as far west as Moultrie, Illinois. As a result of the open seasons, REX has entered into firm transportation contracts with a number of parties for varying volumes and terms that began as early as June 2017. REX currently expects 2017 revenue from those contracts to be at least $13 million.

Tallgrass Energy plans to report second quarter 2017 financial results on Aug. 2, after market close and hold a conference call at 3:30 p.m. Central that day. The company expects to provide additional details on these and other developments during the conference call.

Finally, Tallgrass announced leadership changes in relation to REX, as Crystal Heter, who currently serves as the vice president and general manager for the pipeline, has been named president of the pipeline. Heter succeeded Matt Sheehy as president, as he fully transitions into his role as senior vice president and chief commercial officer for Tallgrass Energy.

Heter, a chemical engineer, started her career as an engineering intern with predecessor companies and moved up through both the technical and commercial sides of the business. She is an accomplished leader at Tallgrass and possesses a deep knowledge of REX, its customers and the markets it serves. She has been instrumental in the execution of Tallgrass’s strategy to transform REX into the nation’s northernmost natural gas header system and is ideally positioned to lead REX into its next phase of growth and development.

Tallgrass Energy is a family of companies that includes publicly traded partnerships Tallgrass Energy Partners and Tallgrass Energy GP LP, and privately held Tallgrass Development. Operating across 10 states, Tallgrass is a growth-oriented midstream energy operator with transportation, storage, terminal and processing assets that serve some of the nation’s most prolific crude oil and natural gas basins.

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