Houston-based midstream JV formed to target Delaware Basin

A Houston-based energy company and an alternative asset manager have teamed up to develop Houston-based Salt Creek Midstream LLC in the Delaware Basin, according to an April 16 press release.

Salt Creek is a joint venture of Houston-based ARM Energy Holdings LLC and funds managed by Los Angeles-based Ares Management LP (NYSE: ARES) that was formed in 2017. ARM Midstream Management LLC, a subsidiary of ARM Energy, will serve as operator of the project, per the release.

As a full-service midstream provider, Salt Creek will offer gas and crude gathering, compression, cryogenic processing and treating services. It will primarily consist of multiple cryogenic processing facilities, plus crude-gathering pipelines, compression and treating facilities. By the end of this year, Salt Creek is expected to have 260 million cubic feet per day of processing capacity, which could be expanded as producers are added to the system.

So far, Salt Creek has commitments from multiple producers for more than 250,000 dedicated acres across Culberson, Reeves, Ward, Winkler, Lea, Pecos and Eddy counties in the Delaware Basin, part of Texas’ booming Permian Basin. The JV also closed a $350 million term loan facility, of which Deutsche Bank acted as sole arranger and underwriter.

“ARM’s downstream intelligence and in-depth fundamentals analysis provided us with the insight to identify Salt Creek as a unique midstream offering for Delaware Basin producers as we continue to build world-class midstream assets spanning the entire basin, as well as downstream market solutions for residue gas, NGLs and crude,” ARM Energy CEO Zach Lee said in the release. “We believe the rapid development of the Salt Creek project, on the heels of our successful development and sale of Kingfisher Midstream, demonstrates our agility, efficiency and integrated approach in evaluating and capitalizing on market opportunities.”

Kirkland & Ellis LLP represented Salt Creek Midstream in the deal.

Silver Run Acquisition Corp. II, a blank-check company led by former Anadarko Petroleum Corp. CEO James Hackett, acquired Kingfisher Midstream LLC and Houston-based Alta Mesa Holdings LP, an independent exploration and production company, to form a $3.8 billion upstream and midstream company. That deal closed in February, and the new company was renamed Alta Mesa Resources Inc. (Nasdaq: AMR). ARM Energy received $800 million in cash, about $550 million in Silver Run II stock and up to roughly $200 million in additional Silver Run II stock based upon future Silver Run II trading performance.