Hess has signed a memorandum of understanding (MOU) to offload its existing Bakken water services business to its joint venture company Hess Infrastructure Partners (HIP) for $225m in an all-cash deal.
The scope of the Bakken water services business covers almost all the produced water gathering assets and saltwater disposal services held by Hess in the Bakken shale play in North Dakota.
Currently, the business to be divested by Hess is made up of more than 241.4km of existing Hess water gathering pipelines, which capture nearly 24,000 barrels per day of produced water.
HIP chief operating officer John Gatling said: “Adding an integrated water business is a great opportunity for HIP. Hess has been actively building the water infrastructure necessary to meet its accelerated Bakken growth profile in tandem with HIP’s oil and gas infrastructure buildout.
“The expected growth in produced water volumes over the next several years and underdeveloped basin infrastructure creates an attractive opportunity for continued investment to build additional infrastructure for Hess and third parties.”
Hess and HIP expect to sign agreements pertaining to the transaction, which is likely to be closed in the first quarter of 2019, depending on receipt of regulatory approvals.
As per the terms considered by the MOU, HIP will give Hess Midstream a right of first offer to buy the Bakken water services business in the event it decides to sell it in the future.
HIP is Hess’ midstream energy joint venture with Global Infrastructure Partners (GIP). It owns stakes in several midstream oil and natural gas service providers in the Bakken and Three Forks shale plays in the Williston Basin area.
HIP chief financial officer Jonathan Stein said: “Consistent with our commitment to deliver stable cash flows, the water services business is expected to be underpinned by a long-term contract that includes minimum volume commitments for both produced water gathering and disposal services, and annual tariff rate recalculations for the produced water gathering services.
“This contract structure is expected to be complementary with the current contract structure of our existing assets, making the water services business a strong addition to the HIP portfolio.”