I Squared to acquire $309m gathering system

The investment will be funded by the US firm's debut vehicle, which reached its final close on $3bn last April.

New York-based  I Squared Capital has agreed to acquire the San Juan Basin gathering system from oil and gas group WPX Energy (WPX) via its debut infrastructure fund. 

The $309 million transaction includes $285 million in cash and an investment promise of $24 million to expand the system, which will support WPX Energy's continued operations in the Gallup oil play. It made a discovery there in 2013 and has since grown its production to more than 10,000 barrels per day in the third quarter of 2015.

Upon closing the deal, the system will comprise 220 miles of oil, gas and water gathering lines across 100,000 acres in northwestern New Mexico and southwestern Colorado. WPX will continue operating the system for at least two years after the closing date. The company has the option to continue in its operating role after the initial management commitment expires.

WPX said it plans to continue its focus on reducing debt through 2016. The company currently carries $3.2 million in debt, with $3 million of that in notes and the remainder primarily in revolver borrowings, according to president and chief executive Rick Muncrief. 

The deleveraging plan was sparked by the company's acquisition of Permian Basin assets in August. WPX is also considering “options to accelerate value” from its Piceance Basin asset holdings in Colorado, according to a company statement.

For the latter half of 2015, WPX's divestment goal was set between $400 and $500 million. The company achieved a total of $575 million.  

In April 2012, WPX offloaded $306 million in assets located in the Barnett Shale and Arkoma Basin regions to Kohlberg Kravis Roberts (KKR) Natural Resources , a partnership between KKR and Premier Natural Resources.

The $3 billion total gathered by ISQ represented the second-largest fund close  in the first half of 2015 after Blackstone 's $4.5 billion Energy Partners II. It was the largest inaugural closing of any infrastructure fund since 2009. 

JP Morgan Securities acted as exclusive financial advisor to WPX Energy and Deutsche Bank Securities advised I Squared Capital. The San Juan Basin system transaction is expected to close in the first quarter of 2016.