40 Miles from Denver, Part 5 - Western Midstream's D-J Basin Crude Gathering Systems

Occidental Petroleum’s recent acquisition of Anadarko Petroleum made Oxy the #1 producer in the Denver-Julesburg (D-J) Basin and gave it a majority stake in Western Midstream Partners, which owns crude-gathering and other midstream assets in the D-J, the Permian and the Marcellus. While Western Midstream’s gathering focus had been on helping Anadarko meet its own midstream needs, Oxy sees the partnership taking on a broader role as a provider of gathering services to third parties as well. Toward that end, Oxy and Western Midstream a few days ago announced a series of agreements designed to allow Western Midstream to operate as an independent company. Today, we continue a series on crude-related infrastructure in the D-J with a look at Western Midstream’s gathering and related assets owned in part by the basin’s largest oil, natural gas and NGL producer.

This is the fifth episode in the series. In Part 1, we explained that the D-J area in northeastern Colorado and southeastern Wyoming offers an unusually intense concentration of hydrocarbons within four geologic layers, or “benches,” only a few thousand feet below the surface, as well as low per-well drilling costs and direct pipeline access to the crude oil hub in Cushing, OK. We also pointed out that D-J crude production has doubled in the past 18 months to about 650 Mb/d, and that the vast majority of the basin’s production growth has been occurring in Weld County. Lastly, we discussed the Black Diamond crude gathering system in Weld County that is co-owned by Noble Midstream Partners and Greenfield Midstream. Part 2 reviewed Noble Midstream’s nearby Wells Ranch, East Pony, Greeley Crescent and Mustang systems, and Part 3 considered the crude transportation network now being expanded by Taproot Energy Partners. In Part 4, we discussed the gathering systems, trunk lines and crude storage owned by ARB Midstream.

Today, it’s Western Midstream Partners’ turn. Western Midstream is a master limited partnership (MLP) established in February 2019 to consolidate and simplify the ownership of the midstream assets that had been owned by either Western Gas Partners or Anadarko Petroleum, the latter of which had set up the Western Gas Partners MLP in 2007. As part of the deal that closed 11 months ago, Western Midstream acquired (for about $4 billion; half of it in cash and half in equities) Anadarko’s remaining midstream assets, most of them in either the D-J Basin or the Permian’s Delaware Basin. The end result was that Anadarko owned 100% of the MLP’s general partner stake and about 55% of its Western Midstream’s limited partner units. Starting in April 2019, Anadarko was the target of a bidding war between Chevron and Occidental Petroleum. Oxy won that war in May with a $38 billion cash-and-stock offer  — the total value of the transaction, including Oxy’s assumption of Anadarko’s debt, was $57 billion — and closed on the deal in August 2019. As part of a larger effort to reduce its debt, Oxy considered the sale of at least some of its ~55% stake in Western Midstream, but with the value of many midstream MLP stocks plummeting through late summer and the fall, Oxy put that idea on hold, at least for the time being.

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