DETROIT, Oct. 18, 2019 /PRNewswire/ -- DTE Midstream, a
non-utility business of DTE Energy (NYSE: DTE), today announced it
entered into an agreement to acquire a gathering system and
gathering pipeline in the Haynesville shale formation of Louisiana for a purchase price of $2.25 billion in cash, plus a $400 million milestone payment upon completion of
the gathering pipeline in the second half of 2020. Under the terms
of the agreement, DTE will acquire 100 percent of the assets from
Momentum Midstream and Indigo Natural Resources, the primary gas
producer supplying the system. Assets that are part of the
acquisition include an existing gathering system and a 150-mile
gathering pipeline under construction, which will be in service in
the second half of 2020. The primary assets gather natural gas
produced in the Haynesville shale
basin and access multiple major downstream pipelines, including
those serving the Gulf Coast.
"DTE's non-utility operations continue to grow, perform well and
fit nicely into our planned utility and non-utility mix," said
Jerry Norcia, president and CEO of
DTE Energy. "This acquisition significantly enhances the strength
and diversity of DTE Midstream, adding premium assets in one of the
fastest growing and best positioned U.S. shale formations. The
successful operation of the Link asset, also purchased from
Momentum, demonstrates the operating expertise and value creation
DTE Midstream brings to this new system. In addition, the company
gains a strong commercial partner in Indigo, one of the nation's
largest private natural gas producers supplying the rapidly
growing demand in the Gulf Coast region.
"This acquisition is highly
accretive, has world-class resources, has excellent
access to large markets, and is in the early- to
mid-cycle development phase. It checks all of our boxes," Norcia
added.
Strategic and Financial Benefits
- Assets in Louisiana's
highly-economic Haynesville shale
basin will enhance DTE Midstream's business and provide access to
growing Gulf Coast markets. The assets serve multiple markets,
including Louisiana, the nation's
third largest natural gas consumer, and the growing Gulf Coast
where demand for natural gas is rapidly increasing in the power,
industrial and LNG export sectors. Furthermore, they are
strategically located to meet this increasing demand given their
proximity and access to multiple major downstream pipelines with
bi-directional capability. DTE has a proven track record of
creating value in multiple basins starting more than 30 years ago
in the Michigan producing basins,
then the Texas Barnett Shale and more recently in the Appalachian
basin. Haynesville provides the
next opportunity for DTE to create significant value with its
midstream assets in a very high-quality basin.
- Highly and immediately accretive transaction solidifies
earnings growth and accelerates achievement of DTE Midstream's
five-year investment plan. The transaction, at a project
level, is immediately $0.15 accretive
to operating earnings per share in 2020, growing to $0.45 per share over five years with a strong
cash flow profile.
- Strong returns, backed by long-term contracts and strong
credit provisions, with an experienced producer. Through
this acquisition, DTE Midstream is investing in economically
strong and strategically situated assets that are supported by
long-term contracts. The acquired assets are fully contracted with
a remaining tenor of 13.5 years for the existing gathering system
and a 10-year contract for the large diameter gathering pipeline
that is currently under construction. Strong credit
provisions are incorporated into the agreement that position
Indigo, the system's primary customer, with a strong balance
sheet. Indigo is one of the largest private producers in the
U.S., and the largest natural gas producer in Louisiana. It is an independent exploration
and production company solely focused on production in the
Haynesville basin.
- DTE reaffirms commitment to long-term business mix of 70-75%
utility. DTE Energy's plan has been to invest
$4 billion-$5
billion in the DTE Midstream business from 2019-2023; this
acquisition is in line with that plan. Capital investments for the
five-year period between 2019 and 2023 will be accelerated,
solidifying more than half of DTE Midstream's five-year investment
plan.
Closing Details
The transaction has been approved by
DTE Energy's Board of Directors and is expected to close in the
fourth quarter of 2019, subject to customary closing conditions and
regulatory approvals, including the expiration or termination of
the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act.
Advisors
Barclays is serving as financial advisor to
DTE Energy. Shearman & Sterling LLP is serving as legal counsel
to DTE Energy, with Dechert LLP assisting with DTE Energy's Hart
Scott Rodino filing. Jefferies and Credit Suisse are serving
as financial advisors to Momentum. Vinson & Elkins is
serving as legal counsel to Momentum, and Kirkland & Ellis as
legal counsel to Indigo.
Conference Call and Webcast
DTE will host a conference
call today at 8:30 a.m. ET to discuss
the acquisition.
Investors, the news media and the public may listen to a live
internet broadcast of the call at dteenergy.com/investors. The
telephone dial-in number in the U.S. and Canada toll free is: (800) 367-2403 or
international toll: (334) 777-6978. The passcode is 5773120. The
webcast will be archived on the DTE Energy website at
dteenergy.com/investors.
About DTE Midstream
DTE Midstream is the energy
industry's trusted natural gas storage, pipeline and gathering
provider across the Midwest, Appalachia, Northeast and Ontario. The company develops and constructs
tailored infrastructure solutions for customers in order to achieve
reliable, safe and cost-effective transport and storage of natural
gas. DTE Midstream operates highly reliable assets with
one of the best safety records in the industry, while always
seeking the best value solution for its customers.
About DTE Energy
DTE Energy (NYSE: DTE) is
a Detroit-based diversified energy company involved in the
development and management of energy-related businesses and
services nationwide. Its operating units include an electric
company serving 2.2 million customers in Southeast
Michigan and a natural gas company serving 1.3 million
customers in Michigan. The DTE portfolio includes energy
businesses focused on power and industrial projects; renewable
natural gas; natural gas pipelines, gathering and storage; and
energy marketing and trading. As an environmental leader,
DTE utility operations will reduce carbon dioxide and methane
emissions by more than 80 percent by 2040 to produce cleaner
energy while keeping it safe, reliable and affordable. DTE
Electric aspires to achieve net zero carbon by 2050. DTE is
committed to serving with its energy through volunteerism,
education and employment initiatives, philanthropy and
economic progress. Information about DTE is available at
dteenergy.com, empoweringmichigan.com,
twitter.com/dte_energy and facebook.com.
Use of Operating Earnings Information
DTE Energy
management believes that operating earnings provide a more
meaningful representation of the company's earnings from ongoing
operations, and uses operating earnings as the primary performance
measurement for external communications with analysts and
investors. Internally, DTE Energy uses operating earnings to
measure performance against budget and to report to the Board of
Directors.
In this release, DTE Energy discusses operating earnings
guidance. It is likely that certain items that impact the company's
reported results will be excluded from operating results.
Reconciliations to the comparable reported earnings guidance are
not provided because it is not possible to provide a reliable
forecast of specific line items (i.e. future non-recurring items,
certain mark-to-market adjustments and discontinued operations).
These items may fluctuate significantly from period to period and
may have a significant impact on reported earnings.
Forward Looking Statements
Certain information
presented herein includes "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995
with respect to the financial condition, results of operations, and
businesses of DTE Energy. Words such as "anticipate," "believe,"
"expect," "projected," "aspiration," and "goals" signify
forward-looking statements. Forward-looking statements are not
guarantees of future results and conditions, but rather are subject
to numerous assumptions, risks, and uncertainties that may cause
actual future results to be materially different from those
contemplated, projected, estimated, or budgeted. Many factors may
impact these forward-looking statements including, but not limited
to, the following: the failure to consummate the transaction, the
risk that we will not achieve expected synergies, the risk that the
operations being acquired in the acquisition will not be
successfully integrated or that such integration will take longer
than expected, the risk that the operations being acquired will not
perform as expected; and the risks discussed in our public filings
with the Securities and Exchange Commission. Accordingly, investors
should not place undue reliance on forward-looking statements as a
prediction of actual results. New factors emerge from time to time.
We cannot predict what factors may arise or how such factors may
cause results to differ materially from those contained in any
forward-looking statement. Any forward-looking statements speak
only as of the date on which such statements are made. We undertake
no obligation to update any forward-looking statement to reflect
events or circumstances after the date on which such statement is
made or to reflect the occurrence of unanticipated events. This
document should also be read in conjunction with the
Forward-Looking Statements section of the joint DTE Energy and DTE
Electric 2018 Form 10-K and 2019 Forms 10-Q (which sections are
incorporated by reference herein), and in conjunction with other
SEC reports filed by DTE Energy.
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SOURCE DTE Energy