DTE Midstream, a non-utility business of Detroit-based DTE Energy, has agreed to acquire a gathering system and gathering pipeline in the Haynesville shale formation of Louisiana for a purchase price of $2.25 billion in cash, plus a $400 million milestone payment upon completion of the gathering pipeline in the second half of 2020.
Under the terms of the agreement, DTE will acquire 100 percent of the assets from Momentum Midstream and Indigo Natural Resources, the primary gas producer supplying the system. Assets that are part of the acquisition include an existing gathering system and a 150-mile gathering pipeline under construction, which will be in service in the second half of 2020. The primary assets gather natural gas produced in the Haynesville shale basin and access multiple major downstream pipelines, including those serving the Gulf Coast.
"DTE's non-utility operations continue to grow, perform well and fit nicely into our planned utility and non-utility mix," DTE Energy President and CEO Jerry Norcia said in a statement. "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.
“The successful operation of the Link asset, also purchased from Momentum, demonstrates the operating expertise and value creation DTE Midstream brings to this new system. In addition, the company gains a strong commercial partner in Indigo, one of the nation's largest private natural gas producers supplying the rapidly growing demand in the Gulf Coast region. This acquisition is highly accretive, has world-class resources, has excellent access to large markets, and is in the early- to mid-cycle development phase. It checks all of our boxes.”
The transaction, at a project level, is immediately 15 cents accretive to operating earnings per share in 2020, growing to 45 cents per share over five years with a strong cash flow profile.
DTE Energy's plan has been to invest $4 billion to $5 billion in the DTE Midstream business from 2019 to 2023; this acquisition is in line with that plan. Capital investments for the five-year period between 2019 and 2023 will be accelerated, solidifying more than half of DTE Midstream's five-year investment plan.
The transaction has been approved by DTE Energy's board of directors and is expected to close in the fourth quarter of 2019, subject to customary closing conditions and regulatory approvals, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.
Barclays is serving as financial adviser to DTE Energy. Shearman & Sterling LLP is serving as legal counsel to DTE Energy, with Dechert LLP assisting with DTE Energy's Hart Scott Rodino filing. Jefferies and Credit Suisse are serving as financial advisers to Momentum. Vinson & Elkins is serving as legal counsel to Momentum, and Kirkland & Ellis as legal counsel to Indigo.
