Saddlehorn owns and operates a pipeline system that runs from the DJ and Powder River basins in Colorado to storage facilities in Cushing, Oklahoma, with a current capacity to transport 190,000 bpd of crude oil. Greenfield and Noble Midstream Partners, acting through their existing joint venture company known as “Black Diamond Gathering LLC,” acquired the 20% membership interest in Saddlehorn from two of the existing three owners.
The terms for the acquisition required Black Diamond to pay the sellers $155 million and also obtain production commitments for up to 100,000 bpd from third-party producers, which will be transported on the Saddlehorn Pipeline. In exchange for the production commitment, the sellers agreed to carry Black Diamond for its share of the costs associated with two expansion projects on the Saddlehorn Pipeline, which will eventually have the capacity to transport 290,000 bpd of crude oil.
The transaction involved complex issues related to the allocation of rights and responsibilities between Greenfield and Noble concerning the management of the investment in Saddlehorn, as well as agreements concerning the sourcing of the production commitments from third-party producers and credit support backstops associated with those production commitments.
The Reed Smith team for Greenfield was led by Houston-based Energy & Natural Resources (ENR) partner Gary C. Johnson, along with ENR partner Peggy Heeg in Houston and ENR partner Jorge Gutierrez in Dallas. Pittsburgh-based Tax partner Leo Hitt advised on the tax implications of the transaction. They were assisted by ENR associates Ali Burner in Austin and Jim Pappenfus in Houston. Houston partner Ricky Raven in the firm’s Global Commercial Disputes Group is the Client Relationship Lawyer for Greenfield.
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