Devon Energy Corp. has agreed to combine its U.S. midstream assets with those of Dallas-based Crosstex Energy LP to form a new midstream business, the companies announced Monday morning.
The new company, which will be named before the Devon-Crosstex deal closes early next year, is expected to have adjusted earnings of about $700 million in 2014.
“The combined company's midstream assets and expertise greatly accelerate the value proposition of Devon's previously announced stand-alone master limited partnership in a manner that is highly accretive to our shareholders,” Devon CEO John Richels said. “Additionally, this transaction provides Devon a market-based valuation for these assets on a go forward basis.”
Devon had been moving toward creating a master limited partnership for its midstream assets, a notion first raised during February's fourth-quarter earnings call. Spinoff Devon Midstream Partners LP filed a registration statement with the U.S. Securities and Exchange Commission on Sept. 27.
Now Devon is joining with Crosstex to form two publicly traded entities: a master limited partnership and a general partner.
Devon will have a controlling interest in both entities.
The combination of Devon's and Crosstex's extensive midstream systems and processing, fractionation and logistics assets provides the new company with assets in many of North America's premier oil and natural gas regions.
The new company will have about 7,300 miles of gathering and transportation pipelines, 13 processing plants with 3.3 billion cubic feet a day of net processing capacity and six fractionators with 165 million barrels a day of net fractionation capacity. It also will have barge and rail terminals, product storage facilities, brine disposal wells and an extensive crude oil trucking fleet.
Devon will be the new company's largest customer.