LEAWOOD, Kan. – Tallgrass Energy Partners, LP (NYSE: TEP) (“Tallgrass”), a key player in North American midstream energy infrastructure, and Silver Creek Midstream, LLC (“Silver Creek”) have officially announced a definitive agreement to jointly develop the Iron Horse Pipeline. This strategic joint venture is set to revolutionize crude oil transportation from the rapidly expanding Powder River Basin (“PRB”) to Guernsey, Wyoming, a critical energy hub.
The Iron Horse Pipeline will serve as a vital link, connecting Silver Creek’s burgeoning gathering system to the Tallgrass Guernsey Terminal, currently under construction, and subsequently to Tallgrass’s Pony Express crude pipeline system (“Pony Express”), along with other significant pipelines at Guernsey. Aiming to streamline operations and enhance value for producers, Iron Horse and Pony Express plan to introduce a joint tariff, offering a single, competitive rate and direct access to the extensive network of refineries served by Pony Express, as well as the Cushing, Oklahoma crude oil hub, directly from the heart of the PRB production area.
The above map illustrates the planned Iron Horse Pipeline and the interconnected infrastructure of Silver Creek and Tallgrass Energy Partners LP. It highlights the strategic positioning of the pipeline to enhance crude oil transportation from the Powder River Basin.
Strategic Asset Sale and Enhanced Footprint in the Powder River Basin
Complementing the joint venture, Tallgrass Energy Partners Lp has also finalized an agreement to sell its existing 50-mile PRB crude oil gathering system to Silver Creek (previously owned by Outrigger Energy). Both Tallgrass and Silver Creek anticipate finalizing the joint venture formation and the sale of Tallgrass Crude Gathering, LLC, later this month, marking a swift and decisive move in the region.
This transaction immediately establishes a robust presence for Silver Creek in the PRB and strategically positions the company as it expands its gathering infrastructure to encompass the core areas of the basin. The acquired gathering system, integrated with Silver Creek’s newly developed systems, will feed into the Silver Creek Midway Terminal, which in turn will supply crude oil to the Iron Horse Pipeline. These strategic moves are poised to firmly establish Silver Creek as a leading crude oil gathering service provider in the Powder River Basin.
Iron Horse Pipeline: Capacity, Infrastructure, and Operational Timeline
As a key contribution to the joint venture, Tallgrass Energy Partners LP will provide approximately 40 miles of pipeline, repurposed from natural gas service by Tallgrass Interstate Gas Transmission, LLC, stretching from Labonte, Wyo. to Guernsey, Wyo. Tallgrass will hold a 75 percent ownership stake and will operate the approximately 80-mile, 16-inch Iron Horse Pipeline. This significant infrastructure project comprises 40 miles of newly constructed pipeline and 40 miles of converted gas-to-oil pipeline. Silver Creek will hold the remaining 25 percent ownership.
The Iron Horse Pipeline is on track to commence operations in Q1 2019, with an anticipated initial capacity of around 100,000 barrels per day. Crucially, the pipeline design allows for substantial expansion capacity to accommodate future growth. Following productive discussions with producers and marketers in the PRB, both parties are confident that a significant portion of the initial capacity will be contracted before the pipeline becomes operational. Depending on secured commitments, the capacity could be further increased beyond the currently planned 100,000 barrels per day, reflecting the strong industry demand and potential of the region.
Synergistic Partnership for Optimal Midstream Solutions
The combined assets and expertise of Silver Creek and Tallgrass Energy Partners LP are designed to create a synergistic system, offering producers in the PRB comprehensive gathering and transportation services, spanning from the wellhead to the final point of sale. “Silver Creek is thrilled to collaborate with Tallgrass in the PRB,” stated J. Patrick Barley, Founder and Chief Executive Officer of Silver Creek. “Their established presence in the basin and extensive long-haul crude transport capabilities provide a significant competitive advantage for Silver Creek as we aggressively expand our gathering system. Together, we are positioned to deliver optimal midstream service solutions for producers throughout the Powder River Basin.”
Matt Sheehy, Tallgrass’s Chief Commercial Officer, echoed this sentiment, stating, “Silver Creek brings a top-tier oil gathering management team to the PRB. Their deep customer relationships and unwavering commitment to customer service make them an ideal partner for Tallgrass Energy Partners LP. The Iron Horse Pipeline is poised to quickly become a crucial pathway for bringing Wyoming production to Guernsey and connecting to the Pony Express pipeline network.”
Tallgrass Energy Partners LP anticipates an investment of approximately $150 million in this strategic initiative. This investment encompasses its proportional share of the construction costs for the Iron Horse Pipeline and the new Tallgrass Guernsey Terminal, excluding the proceeds from the sale of its PRB gathering system.
About Tallgrass Energy Partners LP
Tallgrass Energy is a family of companies that includes publicly traded partnerships Tallgrass Energy Partners, LP (NYSE: TEP) and Tallgrass Energy GP, LP (NYSE: TEGP), and privately held Tallgrass Development, LP. Operating across 11 states, Tallgrass is a growth-focused midstream energy operator. The company possesses a diverse portfolio of transportation, storage, terminal, water, gathering, and processing assets, serving key crude oil and natural gas basins across the United States.
For further information, please visit: www.tallgrassenergy.com
About Silver Creek Midstream, LLC
Based in Irving, Texas, Silver Creek Midstream is a privately held midstream company specializing in providing crude oil gathering, transportation, and storage services in Texas and Wyoming. Silver Creek Midstream is financially backed by an initial $150 million funding commitment from Tailwater Capital, LLC, and the Silver Creek management team.
To learn more, please visit: www.scmidstream.com
About Tailwater Capital, LLC
Tailwater Capital, located in Dallas, is a highly specialized, growth-oriented energy private equity firm with a strong track record of over 65 energy transactions in the upstream and midstream sectors, representing over $16.6 billion in transaction value. Tailwater currently manages over $2.3 billion in committed capital, with over $800 million available for new investments. Tailwater focuses on acquiring and developing midstream assets and participating in non-operated upstream opportunities in select basins. For more information, please visit: www.tailwatercapital.com
Cautionary Note Regarding Forward-Looking Statements
This press release includes forward-looking statements. All statements, other than statements of historical facts, that address expected future activities, events or developments are forward-looking statements. These statements are inherently subject to assumptions, risks, and uncertainties, many of which are outside the control of Tallgrass Energy Partners LP and Silver Creek. These factors may cause actual results to differ materially from those projected or implied in these forward-looking statements. Specific forward-looking statements in this release include those concerning the closing of the joint venture and asset sale transactions, the construction and timelines for the Iron Horse Pipeline, Tallgrass Guernsey Terminal, and Silver Creek Midway Terminal, the projected capacity of the Iron Horse Pipeline, the implementation of a joint tariff, Silver Creek’s position in the PRB market, anticipated contracting of pipeline capacity, the synergy of combined systems, and Tallgrass’s investment amount. These statements are subject to risks and uncertainties detailed in reports filed by Tallgrass Energy Partners LP with the Securities and Exchange Commission. Forward-looking statements are made only as of the date of this release, and neither Tallgrass nor Silver Creek intends to update them, except as legally required.
King & Spalding acted as the exclusive legal advisor to Silver Creek Midstream on this transaction.
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Investor and Financial Inquiries for Tallgrass Energy Partners LP:
Nate Lien, 913-928-6012
[email protected]
Media and Trade Inquiries for Tallgrass Energy Partners LP:
Phyllis Hammond, 303-763-3568
[email protected]
Silver Creek Inquiries:
[email protected]
Tailwater Capital Inquiries:
Stephen Lipscomb, 214-269-1183
[email protected]
Source: Tallgrass Energy Partners, LP
