Harold Hamm Selling Shale Assets To Kinder Morgan -- January 21, 2015 -- This Will Take A Day And A Half For Analysts To Sort Out

Business Insider is reporting:

On Wednesday, pipeline operator Kinder Morgan announced a deal to acquire $3 billion worth of Bakken shale assets from Harold Hamm's Hiland Partners. 

Kinder Morgan said it expects to retain "nearly all" of Hiland's 430 employees.

The announcement of the deal said that Kinder Morgan will acquire Hiland from  Hamm, who founded the company, and "certain Hamm family trusts."

On Wednesday, Kinder Morgan also announced fourth quarter earnings, announcing an increase in its dividend, though the company said it, " experienced some headwinds in the fourth quarter due primarily to commodity pricing."

The press release:

KMI will acquire Hiland Partners (Hiland) from its founder, Harold Hamm, and certain Hamm family trusts, for a total purchase price of approximately $3 billion, including the assumption of debt. Hiland’s assets, which are mostly fee based, consist of crude oil gathering and transportation pipelines and gas gathering and processing systems, primarily serving production from the Bakken Formation in North Dakota and Montana.

The transaction creates a premier midstream platform for KMI in the Bakken with a significant amount of acreage dedicated under long-term gathering agreements. These acreage dedications are with some of the Bakken’s largest and most successful producers, covering some of the most attractive and economically viable areas in the basin. Hiland’s customers include Continental Resources, Inc. (Continental), Oasis Petroleum Inc., XTO Energy Inc., Whiting Petroleum Corporation and Hess Corporation, among others.

Hiland’s crude oil gathering systems, located in North Dakota and Montana, consist of approximately 1,225 miles of gathering pipelines that deliver crude oil to the basin’s major takeaway pipelines and rail terminals. At closing, the crude oil gathering systems will have more than 1.8 million acres dedicated under long-term, fee-based agreements with major Bakken oil producers. At closing, Hiland’s largest oil gathering dedication will be with Continental, which has dedicated the majority of its Bakken acreage to Hiland’s gathering systems under a long-term agreement, including substantial acreage in McKenzie, Mountrail and Williams counties in North Dakota.

Hiland’s crude oil transportation pipeline, the Double H Pipeline, is a 485-mile pipeline that will transport crude oil from Hiland’s Dore Terminal in North Dakota to Guernsey, Wyoming, where Double H interconnects with Pony Express Pipeline for further transportation to Cushing, Oklahoma. Double H Pipeline is in the final stages of construction and is expected to begin service by the end of the month. Double H Pipeline will have an initial capacity of approximately 84,000 barrels per day, with an expansion to approximately 108,000 barrels per day in 2016. The pipeline has firm take-or-pay contracts for approximately 60,000 barrels per day and is currently conducting an open season for additional commitments.

Hiland’s gas gathering and processing systems in North Dakota and Montana consist of approximately 1,800 miles of gathering pipelines and, upon completion of a plant expansion in 2015, 240 million cubic feet per day of gas processing capacity and 30,000 barrels per day of fractionation capacity. These systems process associated gas from oil production and have approximately 3.7 million acres dedicated under long-term agreements with major Bakken oil producers. Additionally, Hiland’s Midcontinent systems gather and process gas in the Woodford shale and other areas of Oklahoma.

From Yahoo!In-Play:

Kinder Morgan to acquire Premier Midstream Position in Bakken for ~$3 bln; acquisition is expected to be modestly accretive to KMI's cash available to pay dividends in 2015 and 2016 and approx six to seven cents accretive beginning in 2017 (KMI) : KMI will acquire Hiland Partners (Hiland) from its founder, Harold Hamm, and certain Hamm family trusts, for a total purchase price of approx $3 bln, including the assumption of debt. Hiland's assets, which are mostly fee based, consist of crude oil gathering and transportation pipelines and gas gathering and processing systems, primarily serving production from the Bakken Formation in North Dakota and Montana. The transaction creates a premier midstream platform for KMI in the Bakken with a significant amount of acreage dedicated under long-term gathering agreements. Hiland's customers include Continental Resources, Oasis Petroleum, XTO Energy, Whiting Petroleum, and Hess Corp, among others.

Forbes: story here.

Plummeting commodity prices have started to take a bite out of the U.S. oil patch, but even with no imminent end to the pain in sight, the value hunters are emerging.

Companies like Schlumberger , Halliburton and Baker Hughes  have announced thousands of layoffs and many more companies are mulling production cuts. A landscape of battered players is ripe for dealmakers though, and helped bring together billionaires Richard Kinder and Harold Hamm, who cut a $3 billion deal for the latter’s transportation business Hiland Partners.

As oil prices have plunged, Kinder and Hamm have seen the path of their fortunes diverge in the past several months, and not just because Hamm had to cut his ex-wife a billion-dollar divorce check.

Hamm’s wealth, closely tied to shares of his publicly-traded vehicle Continental Resources , has plummeted from $18.7 billion at the time of September’s Forbes 400, to $9.8 billion at the close of trading Wednesday, as crude oil prices have tumbled to less than $50 a barrel. Kinder, meanwhile, has seen his fortune grow over the same span, to $11.8 billion from $10.7 billion, thanks in part to his November consolidation of the various segments of his empire that were previously spun out into master limited partnerships. (That $70 billion transaction marked the second-biggest energy deal in U.S. history, behind only the 1999 merger of Exxon and Mobil.)

The pair were in the same orbit Wednesday, as Kinder Morgan announced it will buy Hiland Partners from Hamm and his family trusts that control the business, for $3 billion including debt. Hiland, focused on systems and infrastructure for the transportation of oil and gas, primarily in the Bakken formation of North Dakota and Montana, has customers like Oasis Petroleum, Whiting Petroleum, Hess and Exxon Mobil's XTO Energy, in addition to Hamm’s Continental.

On Hamm’s side of the table, raising a few billion dollars gives him ammunition should he decide to snatch up any oil businesses that blow up in the face of $50 a barrel U.S. crude. In December, Hamm told Forbes’ Christopher Helman that production cuts are a necessary part of the cycle, but that came after his bullish bet months earlier to unwind hedges that would have lessened his exposure to crude’s swoon.

“A commodity producer should be comfortable being exposed to prices,” Hamm said. With that mindset, it would come as no surprise if he’s out looking for assets on the cheap that offer big potential upside, and willing to let go of a safer, but probably less lucrative, pipeline business to help fund any acquisitions.