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ArcLight Capital Joint Venture to Expand Eagle Ford Capacity

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A Boston-based private equity firm has formed a new midstream company to build out gathering, storage and takeaway capacity in the Eagle Ford shale region of Texas.

ArcLight Capital Partners LLC announced July 30 that its newly formed portfolio company Republic Midstream LLC has executed agreements with Penn Virginia Corp. to construct and operate a crude oil gathering system, a central delivery terminal complex and an intermediate takeaway pipeline to serve Penn Virginia’s Eagle Ford shale acreage. ArcLight has committed $400 million to Republic Midstream, which will be managed by two of ArcLight’s experienced midstream portfolio companies, Denver-based American Midstream Partners LP and Irving, Texas-based JP Energy Partners LP. Each company will be offered the right to purchase 50 percent of Republic Midstream after operations commence, according to a company statement.

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The gathering system will initially consist of 180 miles of gathering and trunk lines located in north-central Gonzales and western Lavaca counties, Texas, which will deliver gathered volumes to a 144-acre central delivery point in western Lavaca County capable of storing and blending crude oil volumes.

The intermediate system will consist of a 12-in., 30-mile takeaway pipeline with initial capacity of 80,000 barrels per day. It will receive crude volumes via pipeline and truck at the delivery facility and transport batched volumes to major long-haul takeaway pipelines.

The central delivery point facility and intermediate system are being designed to serve multiple markets and to accommodate various crude oil specifications from both Penn Virginia and third parties. Penn Virginia currently operates five rigs in areas served by the gathering system with more than 200 developed wells and more than 1,300 remaining drilling locations in the acreage dedicated to Republic Midstream.

American Midstream will perform construction, operations and general management services for Republic Midstream. The company already owns and operates a gas gathering and redelivery system serving Penn Virginia in the same area where the crude oil gathering system will be built. In addition, an affiliate of American Midstream’s general partner is constructing a full-well-stream gathering system for another Eagle Ford producer in Gonzalez County.

JP Energy will perform commercial services for Republic Midstream, including working with producers to provide crude oil solutions from the wellhead to the end market. The company’s crude oil supply and logistics division is active in marketing and transporting crude oil for producers in the Eagle Ford located near Republic Midstream’s central delivery point and intermediate system and has similar operations and commercial services in other major producing basins.

“With our equity commitment, experience in capitalizing new ventures and the proven track record of our portfolio companies managing the entity, Republic Midstream is positioned to become a critical infrastructure solution for Penn Virginia and other regional operators,” said ArcLight managing partner Daniel Revers, who called the eastern Eagle Ford shale region “a premier sub-play with some of the best drilling economics in North America.”

The new crude oil gathering, storage and transmission system that American Midstream is building is “highly complementary to our existing Eagle Ford gas gathering system for Penn Virginia, as well as the full-well-stream system we are developing with our general partner in Gonzales County,” according to Steve Bergstrom, American Midstream executive chairman, president and CEO.

JP Energy has made the Eagle Ford a key area of focus, said company CEO J. Patrick Barley, who added, “We expect that as Penn Virginia and other producers continue to develop the eastern Eagle Ford, Republic Midstream’s locational advantages and broad range of logistical capabilities will prove immensely valuable to both the producer community and downstream players in the crude oil markets.”

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