By Alison Sider And Lisa Beilfuss
Enterprise Products Partners LP, one of the largest pipeline
companies in the U.S., will buy Texas oil and gas pipelines and
processing plants from Pioneer Natural Resources Co. and Reliance
Industries Ltd. for $2.15 billion.
Pioneer is one of the most active drillers in U.S. shale
formations, but last year's oil price plunge forced the company to
tighten its belt. In November, Pioneer announced it was looking for
someone to buy its Eagle Ford Shale pipeline unit, a joint venture
between Pioneer and Indian conglomerate Reliance. The assets move
and process crude-oil and natural gas in South Texas.
Many energy watchers have predicted the industry downturn would
push companies to the brink, forcing them to sell assets at bargain
prices in order to stay on good terms with lenders. Pipeline
networks and other logistics infrastructure were widely expected to
be first on the block.
But investors and lenders have been more willing to keep funding
the energy industry than many expected, and as a result, fewer of
those deals have been done than many companies that own and operate
pipelines, storage terminals and oil refineries were hoping
for.
The benchmark price for U.S. oil is trading around $60 a barrel,
or 40% lower than a year ago, but Pioneer Chief Executive Scott
Sheffield said he's growing more confident that the crude price has
hit its bottom. Pioneer is one of a growing number of companies
that plans to put drilling rigs back to work. The influx of cash
from the deal announced Monday will help it do that.
The same improves Pioneer's balance sheet and will "allow us to
strategically redeploy capital to our core, oil-rich
Spraberry-Wolfcamp asset in the Permian Basin of West Texas," Mr.
Sheffield said.
By early 2016, Pioneer expects to add back 20 drilling rigs to
its U.S. operations.
The deal gives Enterprise 460 miles of natural gas pipelines, 10
gas plants and 780 million cubic feet a day of gas treatment
capacity.
It also gives Enterprise 119,000 barrels a day of ultralight oil
stabilization capacity, the company said. Enterprise and Pioneer
became the first U.S. energy companies to gain federal permission
to export ultralight oil, known as condensate, from the U.S.
despite a long-standing ban on selling American oil overseas.
Pioneer and Reliance will each get roughly $1 billion from the
sale. The companies have committed to using the pipeline system
under a 20-year, fixed-fee agreement that includes a minimum volume
requirement for the first seven years.
Pioneer said the deal will allow it to export more ultralight
oil from Texas by way of Enterprise's facilities. The company has
shipped abroad about 600,000 barrels a month since last summer.
The deal is expected to be completed in the third quarter,
pending regulatory approvals and closing conditions.
Write to Alison Sider at alison.sider@wsj.com and Lisa Beilfuss
at lisa.beilfuss@wsj.com
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