Kinder Morgan to buy Petrohawk pipelines for $855M

By Mike Lee and David Wethe
Bloomberg News

Kinder Morgan Energy Partners LP, the second-largest U.S. pipeline partnership by market value, will pay $855 million to complete its purchase of PetroHawk Energy Corp’s gas-gathering pipelines in the Haynesville Shale and obtain a 25 percent stake in a joint venture with the company in Texas’s Eagle Ford shale.

Kinder Morgan also will spend $220 million to build an oil pipeline from the Eagle Ford to the Houston Ship Channel, the company said in a statement today.

The agreement strengthens Kinder Morgan’s position in two of the biggest oil and gas shale formations in the U.S. and provides Petrohawk with cash to develop its oil and gas producing properties.

“We expect opportunities in the prolific natural gas shales to be a primary driver of future growth,” Chief Executive officer Richard Kinder said in the statement.

Kinder bought a 50 percent stake in PetroHawk’s 400-mile pipeline system in the Haynesville Shale in Louisiana and Texas in April 2010 for $875 million. It will assume $65 million in debt for the Eagle Ford assets and the rest of the Haynesville assets, now known as Kinderhawk Field Services, bringing the total value of the transaction to $920 million, the company said.

Joint Venture

Petrohawk will own 75 percent of the Eagle Ford joint venture, which will include 280 miles of gas gathering lines and 112 miles of gas condensate gathering lines, according to the statement. The Eagle Ford Shale is an oil and natural-gas formation that lies under a 50-by-400 mile swath of South Texas.

Petrohawk, based in Houston, reported a first-quarter net loss of $1.2 million today. Excluding the impact of hedging contracts that lock in the price of energy commodities, the company earned $44.4 million, or 15 cents a share.

Enterprise Products Partner LP is the largest U.S. pipeline operator.