Producers Midstream to Expand Midstream System in Delaware Basin

Dallas-based Producers Midstream II, LLC said it entered into definitive agreements to “significantly” expand its gathering, treating, and processing infrastructure in Lea County, New Mexico, with undisclosed Permian Basin operators.

The phase two expansion of Producers Midstream’s Delaware Basin system aims to increase processing capacity by 50 percent from 60 million standard cubic feet per day (MMscfd) to 90 MMscfd and introduce an acid gas injection (AGI) well, according to a news release from the Tailwater Capital portfolio company.

Financial terms of the agreements were not disclosed.

The enhanced system, which is expected to be fully operational by the fourth quarter, targets to offer expanded processing capacity and will be equipped to handle a broad range of gas compositions, including hydrogen sulfide, carbon dioxide, and nitrogen to ensure consistent downstream market delivery, the company said.

The expansion builds on the successful first phase of the development, which became operational in the second quarter, according to the release.

Producers Midstream said it continues to assess further expansion projects that can be rapidly deployed with a “phased development strategy [that] enables rapid, capital-efficient scalability by building upon its existing asset base”.

Producers Midstream said it has secured long-term acreage dedications and volume commitments from several undisclosed “premier” Permian operators, with additional commercial discussions underway to support further growth. Along with the customer commitments, the company said it has secured long-term residue and natural gas liquids (NGL) takeaway to fully support field development. 

“Strategically expanding within our core footprint enhances operational efficiency, maximizes asset utilization, and provides immediate value to our customers and stakeholders,” Producers Midstream President and CEO Matt Flory said. “Located in a high-growth corridor of the Delaware Basin, this expansion provides critical infrastructure to support our partners’ development objectives”.

“This expansion is another testament to Tailwater and Producers Midstream’s focus of growing with our customers,” Tailwater Capital Partner Stephen Lipscomb said. “Producers Midstream is delivering critical infrastructure solutions to meet the needs of operators in one of the most dynamic areas of the Delaware Basin”.

Producers Midstream describes itself as operating a diversified midstream platform with significant scale across the Eastern Permian Shelf, Texas Panhandle, and Western Oklahoma with 800 MMcfpd of gathering and processing capacity. Underpinned by over 745,000 dedicated acres, the company processes over 300,000 MMcfpd of wellhead volumes on over 3,400 miles of pipelines while treating for nitrogen, hydrogen sulfide, carbon dioxide and other non-conforming contaminants.

PM said it operates 150 miles of NGL transportation lines in conjunction with two public midstreams to move products from the Anadarko Basin and Barnett Shale to downstream markets on the Texas Gulf Coast. Its system has 17 interconnects with downstream residue pipelines with ultimate deliveries servicing the Mid-Continent, North Texas, and the Midwest.

Dallas-based Tailwater Capital describes itself as an energy and environmental infrastructure private equity firm with a “well-established track record of working constructively with proven management teams to deliver value-added solutions”. The firm said it has raised more than $5 billion in committed capital since inception and the team has executed more than 235 transactions representing over $26 billion in value.

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