Kinder Morgan buys Hamm’s Hiland Partners to gain Bakken footprint

HOUSTON -- Kinder Morgan Inc. (KMI) has announced a definitive agreement whereby KMI will acquire Hiland Partners from its founder, Harold Hamm, and certain Hamm family trusts, for a total purchase price of approximately $3 billion, including the assumption of debt.
 
Hiland’s assets, which are mostly fee based, consist of crude oil gathering and transportation pipelines and gas gathering and processing systems, primarily serving production from the Bakken formation in North Dakota and Montana.

The transaction creates a premier midstream platform for KMI in the Bakken with a significant amount of acreage dedicated under long-term gathering agreements. These acreage dedications are with some of the Bakken’s largest and most successful producers, covering some of the most attractive and economically viable areas in the basin. Hiland’s customers include Continental Resources, Oasis Petroleum, XTO Energy, Whiting Petroleum Corporation and Hess Corporation, among others.

Hiland’s crude oil gathering systems, located in North Dakota and Montana, consist of approximately 1,225 miles of gathering pipelines that deliver crude oil to the basin’s major takeaway pipelines and rail terminals.

At closing, the crude oil gathering systems will have more than 1.8 million acres dedicated under long-term, fee-based agreements with major Bakken oil producers. At closing, Hiland’s largest oil gathering dedication will be with Continental, which has dedicated the majority of its Bakken acreage to Hiland’s gathering systems under a long-term agreement, including substantial acreage in McKenzie, Mountrail and Williams counties in North Dakota.

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 bopd, with an expansion to approximately 108,000 bopd in 2016. The pipeline has firm take-or-pay contracts for approximately 60,000 bopd and is currently conducting an open season for additional commitments.

Hiland’s gas gathering and processing systems in North Dakota and Montana consist of approximately 1,800 miles of gathering pipelines and, upon completion of a plant expansion in 2015, 240 MMcfd of gas processing capacity and 30,000 bpd 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. Additionally, Hiland’s Midcontinent systems gather and process gas in the Woodford shale and other areas of Oklahoma.

Kinder Morgan anticipates retaining nearly all of Hiland’s approximately 430 employees and maintaining KMI’s already significant presence in Oklahoma.

Kinder Morgan expects to close the transaction in the first quarter of 2015.