On August 21, 2024, Enterprise Products Partners L.P. announced that its affiliate has finalized a deal to acquire Piñon Midstream, LLC for $950 million in a debt-free transaction. Piñon Midstream, a portfolio company of Black Bay Energy Capital, specializes in natural gas gathering and treating services in the prolific eastern flank of the Delaware Basin, covering areas in New Mexico and Texas.

Piñon Midstream's assets include approximately 50 miles of natural gas gathering and redelivery pipelines, five 3-stage compressor stations, and existing hydrogen sulfide and carbon dioxide treating facilities with a current capacity of 270 million cubic feet per day (MMcf/d). The company plans to expand this capacity to 450 MMcf/d by late 2025. Additionally, Piñon Midstream operates two of the largest and deepest acid gas injection (AGI) wells in the basin and is considering a third injection well to support up to 750 MMcf/d of total treating capacity.

The acquisition is bolstered by long-term fee-based contracts with minimum volume commitments. Piñon Midstream’s monitoring, reporting, and verification (MRV) plan for permanent carbon dioxide sequestration in its AGI wells, located at the Dark Horse Treating Facility in Lea County, New Mexico, received approval from the Environmental Protection Agency in June 2024. This approval is a significant step towards qualifying for 45Q tax credits.

The Delaware Basin, particularly in Lea County, New Mexico, and Winkler County, Texas, is rich with potential drilling sites, with over 7,500 remaining well locations and multiple geologic production benches. However, drilling has been limited due to inadequate sour gas treating and acid gas injection capacities and lengthy permitting processes.

A. J. “Jim” Teague, co-CEO of Enterprise’s general partner, expressed enthusiasm about the acquisition, noting that Piñon's advanced sour natural gas treating system significantly accelerates Enterprise’s entry into the region by three to four years. He emphasized that the assets align well with Enterprise’s midstream energy system and provide an excellent opportunity to expand their natural gas processing capabilities. Teague also projected that the acquisition would contribute an estimated $0.03 per unit in distributable cash flow in 2025, excluding any potential commercial and operational synergies.

Steven Green, CEO of Piñon Midstream, highlighted the company’s success in developing a top-tier sour gas treatment and carbon sequestration asset, thanking Black Bay Energy Capital for their support. Michael LeBourgeois, Managing Partner at Black Bay, praised the Piñon team’s efforts and strategic vision, while Sam Scofield, Vice President at Black Bay, commended the team’s success in scaling critical infrastructure in the Delaware Basin.

The transaction, which is set to close in the fourth quarter of 2024, is subject to regulatory approvals and will be funded through cash reserves and borrowings from Enterprise’s existing commercial paper and bank credit facilities.