By Jerry A. DiColo
Private-equity firm First Reserve Corp. has formed a new venture
to build pipelines throughout the booming oil fields of North
Dakota, an investment aimed at resolving transportation bottlenecks
plaguing energy producers in the region.
The $23 billion energy-focused firm has committed $150 million
to a joint venture with Denver-based oil-and-gas producer Triangle
Petroleum Corp. (TPLM) to launch a pipeline and transportation
company focused on the Bakken Shale, an unconventional oil and gas
play that has turned North Dakota into the second-largest energy
producing state in the country, after Texas.
The new company, Caliber Midstream Partners LP, will begin by
constructing pipeline gathering systems with a capacity of 10,000
barrels of oil and 15 million cubic feet of natural gas per day by
the middle of next year, connecting more than 100 far-flung oil and
natural-gas well sites to rail terminals.
The company plans to add additional pipelines that will link
wells to major interstate pipelines that cut through the
region.
"There are hundreds of thousands of miles of pipe that need to
be built. It's a massive opportunity," said Jon Samuels, Chief
Executive of Triangle, which contributed $30 million as well as
operational personnel, and will have a 50% voting stake in the new
company. "You could have stable market share and still have 100%
growth per year."
Small producers as well as oil majors such as Exxon Mobil Corp.
(XOM) have rushed to North Dakota to take advantage of the energy
boom, creating thousands of new jobs in construction, trucking and
other services in a sparsely-populated corner of the Midwest. But
vast distances and a lack of infrastructure to move oil and gas has
slowed progress in many promising areas.
"The existing infrastructure is just trucks," said Mark Florian,
managing director of First Reserve and head of the firm's $1.2
billion Energy Infrastructure Fund. "I was up in the Bakken with
the team a month and a half ago. There are wheat fields as far as
the eye can see, dotted with oil wells and nothing in between.
There is nothing connecting any of it."
Caliber isn't expecting any issues due to environmental
permitting.
Triangle, a small exploration and production company, is
expecting to pump as much as 3,600 barrels a day by January.
Currently, the company's wells can profitably pump oil with prices
above $70 a barrel. When the new pipelines are in place, Mr.
Samuels expects the company will break even as long as prices stay
at $45 a barrel.
Write to Jerry A. DiColo at jerry.dicolo@dowjones.com
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