Kinder Morgan To Buy Hiland Partners For About $3 Bln

(RTTNews) - Energy infrastructure company Kinder Morgan Inc (KMI) on Wednesday agreed to buy Hiland Partners from its founder, Harold Hamm, and certain Hamm family trusts, for about $3 billion, including 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.

Based on its long-term forecast for Hiland, Kinder Morgan expects that the multiple of EBITDA paid for Hiland, including future growth capital investments, will decline to about 10 times by 2018. The deal is expected to be modestly accretive to Kinder Morgan's cash available to pay dividends in 2015 and 2016 and about six to seven cents accretive beginning in 2017.

The deal is expected to close in the first quarter of 2015.

Kinder Morgan said the deal creates a premier midstream platform for it 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 Inc, Oasis Petroleum Inc, XTO Energy Inc and Hess Corp, among others.

Hiland's crude oil gathering systems, located in North Dakota and Montana, consist of about 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. 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 about 84,000 barrels per day, with an expansion to about 108,000 barrels per day in 2016. The pipeline has firm take-or-pay contracts for approximately 60,000 barrels per day and is currently conducting an open season for additional commitments.

Hiland's gas gathering and processing systems in North Dakota and Montana consist of about 1,800 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 barrels per day 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 about 430 employees and maintaining Kinder Morgan's already significant presence in Oklahoma.

Bracewell & Guiliani acted as legal counsel to Kinder Morgan, and UBS Securities has provided an about $2 billion bridge financing facility to the company.