Kinder Morgan is expanding its footprint into the Bakken with the acquisition of Hiland Partners (Hiland) for approximately US$3 billion. Hiland holds midstream assets primarily serving production from the Bakken Formation in North Dakota and Montana. The transaction is expected to close in 1Q 2015.
The deal creates a midstream platform for Kinder Morgan in the Bakken with a significant amount of acreage dedicated under long-term gathering agreements. Hiland’s customers include Continental Resources, Inc. (Continental), Oasis Petroleum Inc., XTO Energy Inc., Whiting Petroleum Corporation and Hess Corporation, among others.
“We are delighted to establish a substantial midstream footprint in one of the most prolific oil producing basins in the United States,” said Kinder Morgan chairman and CEO Richard D. Kinder. “Hiland’s systems serve some of the Bakken’s largest and most successful producers, including Continental. We look forward to continuing to provide high quality midstream services to these producers and pursuing incremental growth opportunities in the basin.”
Kinder Morgan plans to retain nearly all of Hiland’s approximately 430 employees and maintain KMI’s already significant presence in Oklahoma.
“Through the hard work of its employees, Hiland has become a premier midstream company. This transaction is about expanding our midstream footprint and Hiland’s employees will be a critical part of that growth,” said Kinder. “We expect this transaction will provide opportunities for Hiland’s many talented employees.”
Hiland’s crude oil gathering systems consist of approximately 1225 miles of gathering pipelines that deliver crude oil to the basin’s major takeaway pipelines and rail terminals.
Hiland’s crude oil transportation pipeline, the Double H Pipeline, is a 485-mile pipeline that will transport crude oil from Hiland’s Dore Terminal in North Dakota to Guernsey, Wyoming, where Double H interconnects with Pony Express Pipeline for further transportation to Cushing, Oklahoma. Double H Pipeline is in the final stages of construction and is expected to begin service by the end of the month. Double H Pipeline will have an initial capacity of approximately 84,000 b/d, with an expansion to approximately 108,000 b/d in 2016.
Hiland’s gas gathering and processing systems in North Dakota and Montana consist of approximately 1800 miles of gathering pipelines and, upon completion of a plant expansion in 2015, 240 million cubic feet per day of gas processing capacity and 30,000 b/d of fractionation capacity. These systems process associated gas from oil production and have approximately 3.7 million acres dedicated under long-term agreements with major Bakken oil producers.