HOUSTON--(BUSINESS WIRE)--Crestwood Midstream Partners LP (NYSE: CMLP) (“Crestwood Midstream” or “Crestwood”) announced today a further expansion of its “Willow Lake Project,” located in the Permian Delaware Basin, which includes the conversion of a portion of its Las Animas natural gas gathering system into rich gas service and the construction of an initial cryogenic natural gas processing plant. The Willow Lake Project, located in Eddy County, New Mexico, was originated in 2013 (Phase 1) through the conversion of an existing Crestwood gathering pipeline and installation of natural gas liquids field separation equipment to support the drilling efforts of Legend Natural Gas III, LP, a subsidiary of Legend Production Holdings, LLC (“Legend”), a Riverstone Holdings LLC portfolio company, targeting the Second Bone Spring formation along with other producers in the region. Based on Legend’s successful 2013 drilling program, Crestwood and Legend have entered into a 10 year, fixed-fee gas gathering and processing agreement covering an area of mutual interest of more than 107,000 acres in the Willow Lake area. Additionally, Crestwood has purchased Legend’s existing gas gathering system which is being integrated into Crestwood’s existing footprint.
Anchored by the Legend contract, Phase 2 of Crestwood’s Willow Lake Project will include construction of a cryogenic natural gas processing facility (the “Willow Lake Plant”) with a capacity of 20 million cubic feet per day (“MMcf/d”) and additional gathering pipelines across the dedication area to support Legend’s 2014 and 2015 drilling program. Upon completion of the Willow Lake Plant, and based on area drilling activity and discussions with current operators, Crestwood is expected to further expand (Phase 3) the Willow Lake gathering system and install a second gas processing plant (the “Delaware Ranch Plant”) with an expected capacity of approximately 120 MMcf/d. The Delaware Ranch Plant is currently owned by Crestwood as a result of its 2012 acquisition of Devon’s West Johnson County gathering system and processing plant located in the Barnett Shale region. Phase 2 of the Willow Lake expansion plan is estimated to cost $25 million to $30 million and is expected to be completed in the third quarter 2014. Phase 3 of the development plan will be initiated when additional producers drill sufficient wells to warrant the additional processing capacity. As an additional service to area producers, Crestwood will be purchasing the natural gas liquids produced at the plants which may include initial trucking, pipeline and marketing services.
The Permian Delaware Basin is an emerging oil and natural gas liquids rich region with approximately 200,000 barrels of oil equivalent per day currently being produced. Production is supported by producer economic returns of approximately 50% from the Bone Spring and 40% from the Wolfcamp formation according to recent studies. Additionally, Eddy County, New Mexico, has been the leading county in the region from a production and drilling activity standpoint since the play began in 2011.
“We are pleased to announce the expansion of Crestwood’s Willow Lake System which represents an important step in the three-phase build out of a large scale green field gas gathering and processing system within the Delaware Basin, one of the fastest growing oil and liquids-rich gas plays in the country,” stated Robert G. Phillips, Chairman, President and Chief Executive Officer of Crestwood’s general partner. “The project expands our footprint around the Las Animas system, and further establishes an early-mover position in an underserved area of the Delaware Basin. We are also pleased to expand our relationship with Legend, providing them long-term, fee-based gathering and processing services as they develop their acreage in this very attractive play. We believe the long term growth potential of this area will allow Crestwood to play a meaningful role in building the infrastructure and providing the midstream services needed by producers in this region.”
About Crestwood Midstream Partners LP
Houston, Texas, based Crestwood Midstream (NYSE: CMLP) is a master limited partnership that owns and operates midstream businesses in multiple unconventional shale resource plays across the United States. Crestwood Midstream is engaged in the gathering, processing, treating, compression, storage and transportation of natural gas; storage, transportation and terminalling of NGLs; and gathering, storage and terminalling of crude oil.
About Crestwood Equity Partners LP
Houston, Texas, based Crestwood Equity Partners LP (NYSE: CEQP) is a master limited partnership that owns the general partner interest, including the incentive distribution rights and an approximate 4% limited partner interest of Crestwood Midstream. In addition, Crestwood Equity’s operations include a natural gas storage business in Texas and an NGL and crude oil supply and logistics business that serves customers in the United States and Canada.
