DTE Midstream, a non-utility business of Detroit’s DTE Energy, has 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 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,” says 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.”
The assets serve multiple markets, including Louisiana, the nation’s third largest natural gas consumer, and the Gulf Coast, where demand for natural gas is increasing in the power, industrial, and liquefied natural gas export sectors. They are also strategically located to meet this increasing demand given their proximity and access to multiple major downstream pipelines with bi-directional capability. DTE started investing in basins in Michigan more than 30 years ago and has investments in the Texas Barnett Shale and the Appalachian basin.
The assets are economically strong, strategically situated, and supported by long-term contracts. They 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 under construction.
DTE is reaffirming its commitment to long-term business mix of 70-75 percent utility. DTE Energy plans to invest $4 billion-$5 billion in the DTE Midstream business from 2019-2023, and this acquisition is in line with the plan. Capital investments for the period are expected to be accelerated, solidifying more than half of DTE Midstream’s five-year investment plan.
The transaction has been approved by DTE Energy’s board of directors and is expected to close in the fourth quarter of 2019.
DTE Midstream offers natural gas storage, pipeline, and gathering.
DTE Energy’s electric company serves 2.2 million customers in southeast Michigan, and its natural gas company serves 1.3 million customers in Michigan. Its goal is to reduce carbon dioxide and methane emissions by more than 80 percent by 2040 and aspires to achieve net zero carbon by 2050.