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Crestwood Midstream Partners Completes Acquisition In Niobrara Shale Gas Gathering And Processing Joint Venture

Stocks in this article: CMLP GE NRGM NRGY

HOUSTON, July 22, 2013 /PRNewswire/ -- Crestwood Midstream Partners LP (NYSE: CMLP) ("Crestwood") and the owner of its general partner, Inergy, L.P. (NYSE: NRGY) ("Inergy"), today announced that Crestwood's subsidiary, Crestwood Niobrara LLC ("Crestwood Niobrara"), has completed the acquisition of a 50% interest in Jackalope Gas Gathering Services, L.L.C. ("Jackalope") from RKI Exploration & Production, LLC ("RKI") for a total cash consideration of $107.5 million.   

The other 50% interest in Jackalope is owned by Access Midstream Partners, L.P. ("Access"). Access will continue to provide field operations and construction management for Jackalope, and Crestwood will assume the commercial development role for the joint venture. 

GE Energy Financial Services provided $80.6 million of preferred equity to Crestwood Niobrara, with the remaining $26.9 million of the acquisition funded under Crestwood's revolving credit facility.  GE Energy Financial Services has agreed to provide 75% of the future capital contributions for Crestwood Niobrara's 50% interest in Jackalope, up to an aggregate contribution of $150 million.

The Jackalope gathering and processing system ("Jackalope System") is located in Converse County, Wyoming, in the emerging Powder River Basin Niobrara Shale play and is currently composed of approximately 100 miles of gathering pipelines and 9,400 horsepower of compression equipment. The Jackalope System is being developed to gather and process rich natural gas produced from a 311,000-acre area of dedication from Chesapeake Energy Corporation ("Chesapeake") and RKI.  Chesapeake and RKI have collectively accumulated the largest acreage block in the Powder River Basin Niobrara Shale play, spanning over 750,000 acres.  The existing assets and future development are supported by a 20-year gathering and processing agreement with Chesapeake and RKI under which Jackalope receives cost-of-service based fees with annual redeterminations that provide for an attractive rate of return on invested capital.

"We are pleased to complete this transaction expanding Crestwood's operations into another very active and emerging shale play," said Robert G. Phillips, Chairman, President and Chief Executive Officer of Crestwood's general partner. "This transaction is another step in the execution of our strategy to position Crestwood in rich gas plays supported by long-term contracts and large acreage dedications.  The Jackalope System provides significant visibility to cash flow growth as midstream infrastructure is expanded to support very capable producers in the Niobrara play.  In addition, we are very excited about the future opportunities the transaction provides for Crestwood to extend its value chain services as infrastructure in the play develops," Phillips added. 

Dan Castagnola, a managing director at GE Energy Financial Services in Houston, said: "We are partnering with strong companies to develop infrastructure underpinned by long-term, fee-based contracts providing attractive returns and helping to grow US shale plays."

Locke Lord LLP and Sidley Austin LLP acted as legal counsel to Crestwood Niobrara and GE Energy Financial Services, respectively, in connection with the acquisition and financing transactions.

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