Hess Corp., a leading operator in the Bakken unconventional shale oil play in North Dakota, will sell a 50% interest in its Bakken midstream assets to Global Infrastructure Partners for cash consideration of US$2.675 billion. Hess and Global Infrastructure Partners will create a premier midstream joint venture (JV) to be named Hess Infrastructure Partners.
Upon closing, the JV will incur $600 million of debt through a five-year term loan with proceeds distributed equally to both partners, resulting in total after-tax cash proceeds, net to Hess, of $3 billion. In addition, the joint venture will have independent access to capital, including a $400 million, five-year senior revolving credit facility, which is fully committed. The transaction is subject to customary closing conditions and is expected to be completed early in 3Q 2015.
The JV plans to continue to pursue a proposed initial public offering (IPO) of Hess Midstream Partners LP common units. John Hess, chief executive of Hess, notes that the JV will be one of the largest midstream operators in the Bakken.
The JV’s assets from Hess include the gas processing plant in Tioga, North Dakota, a rail-loading terminal in Tioga and associated rail cars, a crude oil truck and pipeline terminal in Williams County, North Dakota, a propane storage cavern and rail and truck transloading facility in Mentor, Minnesota, and crude oil and natural gas gathering systems in North Dakota.
For the three months ended 31 March 2015, the midstream segment had net income of $27 million and earnings before interest, taxes, depreciation and amortization (EBITDA) of $64 million. Hess expects the midstream segment EBITDA for the 12 months ending 31 March 2016 to be $290- to $300 million. Hess also expects capital expenditures to be funded by the joint venture on a 100% basis for the same period to be $325- to $350 million.
Hess, through its elected directors, will retain control of the midstream assets’ operations and annual budgeting process. Other decisions, such as capital structure, debt and equity offerings, and new contracts will require joint approval by both Hess and Global Infrastructure Partners elected directors. Hess will operate the assets owned by the joint venture as a contract service provider. Employees who work in these assets today will remain Hess employees.
Hess Corp. has, as of 1 July 2015, completed the previously announced sale of a 50% interest in its Bakken midstream assets to Global Infrastructure Partners for cash consideration of $2.675 billion.
As planned, Hess and Global Infrastructure Partners have created a midstream JV -Hess Infrastructure Partners. The JV has incurred $600 million of debt through a five-year Term Loan A facility with proceeds distributed equally to both partners. In addition, the joint venture has independent access to capital including a fully committed $400 million five-year senior revolving credit facility.
Image: Hess truck and plane toy / Hess Corp.