GIP in midstream joint venture with Hess

The New York-based fund manager will pay $2.67bn for a 50% interest in the oil and gas company’s midstream assets in North Dakota’s Bakken Shale.

Global Infrastructure Partners (GIP) has agreed to partner with Hess Corporation by acquiring 50 percent of the energy company’s midstream assets, located primarily in the Bakken Shale, for $2.67 billion, the US-based fund manager said in a statement on Thursday.

The transaction, which is subject to customary closing conditions and expected to close in the third quarter of 2015, will result in the creation of Hess Infrastructure Partners. Hess will retain a 50 percent stake in the joint venture and will continue to serve as operator of the assets, according to the statement.

GIP is financing the acquisition through Global Infrastructure Partners II (GIP II) – which closed on $8.25 billion in October 2012 – and affiliated funds.

The midstream assets, which are located primarily in North Dakota’s Williams, Mountrail and McKenzie counties, include crude oil and natural gas gathering systems, a natural gas processing and fractionation facility, crude oil export logistics assets and an underground propane storage facility, all providing services to Hess and its affiliates.

“The joint venture with its strategically located assets will be one of the largest midstream operators in the Bakken,” Hess’ chief executive John Hess said in a separate statement. “By capitalising on the financial strength and midstream energy experience of Global Infrastructure Partners, the joint venture will be in a strong position to fund future energy infrastructure investments and continue to grow its midstream business.”

For Hess, the transaction also means “a highly advantaged liquidity position compared to its peer group,” and maintaining a strong balance sheet in a low oil price environment. The company will also use proceeds from the sale to “provide additional financial flexibility for future growth opportunities and continue to repurchase stock on a disciplined basis,” Hess said in its statement.

Other recent investments GIP made through GIP II include the acquisition in March of Competitive Power Ventures (CPV), which includes equity interests in a portfolio of power generation projects, as well as CPV's development and asset management platforms.

In January, GIP announced another strategic partnership, this time with Spanish-based ACS, focusing on infrastructure development. Through that transaction, GIP II will acquire up to a 24.4 percent ownership interest in Saeta Yield, which owns 688 megawatts (MW) of operating wind and solar assets in Spain. It will also buy a 49 percent stake in another company which will own the remaining 460 MW of assets located in Spain, Portugal, Mexico, Uruguay and Peru and be responsible for future development of renewable energy assets around the globe.