Crosstex Investors Cash in on Merger, Selling 18M Units for $550M

Crosstex Energy recently got hitched with the midstream operation of Devon Energy and the new couple gave birth, or rather transformed itself, into EnLink Midstream (see Time to Congratulate Devon & Crosstex on the Birth of EnLink).The new EnLink has a growing presence in both the Utica and Marcellus Shale. They are a “player” in our space, so we keep a close eye on them.

Last Friday the newly combined and renamed EnLink announced owners of 18 million shares of stock in EnLink (called units) have put their shares up for sale with an eye to raising $550 million. However, that money will not flow to the coffers of EnLink. It will go to the owners of the units–presumably top management and/or investors in the old Crosstex. The action does make us wonder: Is this a prelude to some of top management leaving EnLink, or just big money investors cashing in to realize a big ROI? We don’t know. Here’s the announcement from Friday:
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Time to Congratulate Devon & Crosstex on the Birth of EnLink

As we previously told you, Devon Energy, a drilling company with some midstream assets, and Crosstex Energy, a midstream company, were due to merge (see Crosstex Energy Gets a Name Change, Merger with Devon Proceeds). It was quite a while in coming–lots of lawyers reviewing every syllable of every paper.

Last Friday the two companies announced they have finally, fully, irrevocably tied the merger knot and together they have delivered a bouncing baby…midstream company. They named the new baby EnLink. Time for a cigar…
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Crosstex, Devon Name Names of Board & Leaders for New EnLink

MDN has chronicled the marriage of Crosstex Energy (a midstream company) and Devon Energy’s midstream division (see Crosstex Energy Gets a Name Change, Merger with Devon Proceeds). The new entity will take on the name EnLink Midstream and will continue to have major operations in the Marcellus/Utica region. Not every t has been crossed and i dotted, yet. The two are close to tying the knot–the shareholders of both companies need to approve the deal. But it’s a foregone conclusion that the deal is happening and will happen very soon.

It comes as no surprise that the two companies have today announced who will be on the board of directors for the new EnLink operation, and who will lead it as executive management. Here is the announcement that names names for the coming EnLink when the merger is finalized:
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EnLink’s 2014 Crystal Ball: $525M Revenue, $430M Capex

Stockholders will soon vote on the previously announced merger between midstream company Crosstex Energy and driller Devon Energy (see Crosstex Energy Gets a Name Change, Merger with Devon Proceeds). There’s no reason to think the merger will not proceed smoothly. Both companies have operations in the Marcellus and Utica Shale region. The name of the new Devon subsidiary will be EnLink Midstream. As we previously mentioned, Barry Davis, CEO of Crosstex will become (or remain) CEO of EnLink. For us this is a feel-good merger–no one loses their job and Davis, by all accounts, is a really nice guy to work for (see A Peek Behind the Curtain of Crosstex/Devon Midstream Marriage).

Yesterday Crosstex issued their “best guess” as to what revenues and expenses will be for the company for 2014–something financial types call “guidance.” Here is Crosstex/EnLink’s best stab at peering into the crystal ball for 2014…
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A Peek Behind the Curtain of Crosstex/Devon Midstream Marriage

For a number of months, MDN has told you the story/news of the merger between Crosstex Energy (a Dallas, TX company) and Devon Energy (Oklahoma City, OK company). It’s an important story because both have a major presence in the Marcellus/Utica region. Essentially Devon Energy, a driller with a major midstream division, bought out Crosstex, a midstream company, and merged the two operations leaving Crosstex in command of the newly created midstream entity. The newly formed subsidiary company was recently named EnLink Midstream (see Crosstex Energy Gets a Name Change, Merger with Devon Proceeds).

An article in the Dallas Morning News about the merger caught our eye because it profiles the people involved and how the merger happened. We’re not sure that the story reveals any new, salient news about the deal–but it does reveal the depth of experience and character of the people involved. And it inspires confidence that this particular merger, a merger in which no one lost their job, portends very good things for the northeast where EnLink will continue to grow and expand. We’d call it a “here’s why you should feel good about this merger and doing business with these guys” kind of story…
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Crosstex Energy Gets a Name Change, Merger with Devon Proceeds

In October, Devon Energy (a major shale driller in several plays with midstream assets) and Crosstex Energy (a sizable midstream company) announced they will merge their midstream operations into a new company (see Devon Energy & Crosstex Energy Form New Midstream Company in JV). Both companies have major operations in the Marcellus/Utica. At the time of the announcement the new company was unnamed. No longer. Yesterday Devon and Crosstex announced that Crosstex would change its name to the name of the newly combined venture (which is majority owned by Devon). The new name is EnLink Midstream. Barry Davis, CEO of Crosstex will become (or remain) CEO of EnLink.

May we net-net this? Essentially Devon has purchased Crosstex and turned it into a semi-autonomous subsidiary, keeping the Crosstex management team in place. Here’s the statement issued yesterday with details of the legal structure for the new company, which on paper will be two companies for investment purposes–an LLC and an LP (master limited partnership)…
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Devon Energy & Crosstex Energy Form New Midstream Company in JV

Devon Energy (driller with midstream assets) and Crosstex Energy (midstream company) announced today they are merging their midstream operations into a new company. The new midstream company, which will have assets in both the Marcellus and Utica Shale (as well as other shale basins) will be majority owned by Devon. In fact, the biggest customer for the new joint venture will be…Devon itself. The announcement says Devon will dedicate drilling from 800,000 of its leased acres to the new (and as yet unnamed) midstream company.

The boards of directors for both Devon and Crosstex have already voted to OK the merger. Here’s the extensive announcement issued today, which contains details of the somewhat complicated corporate structure of the new company:
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Re-opened Frazeysburg, OH Rail Terminal Ships Utica Condensate

In June, MDN told you about a newly re-opened railroad terminal now being used to ship Utica Shale condensate from Frazeysburg in Muskingum County, OH (see Crosstex Ships Utica Condensate with OH Rail Loading Terminal). Crosstex, the company operating the terminal, held a ribbon-cutting ceremony a few weeks ago at the Black Run rail terminal and issued this update (and picture):
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Crosstex Ships Utica Condensate with OH Rail Loading Terminal

Yesterday, Crosstex Energy re-activated and started to use its Black Run rail loading terminal in Frazeysburg (Muskingum County), OH. The facility will let Crosstex load and ship 24,000 barrels a day of light oil condensate. The condensate is produced by Utica Shale wells.

The rail loading terminal sits on the short line Ohio Central Railroad (OHCR), which in turn connects with the Columbus and Ohio River Railroad, CSX, Norfolk Southern and the Wheeling and Lake Erie Railway. Plenty of markets for drillers to now access for their Utica condensate production…
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Crosstex Invests Another $25M in OH Midstream JV

In March, MDN told you about a new joint venture between Crosstex Energy and Enerven Compression Services to build new compressor stations and a condensate processing plant in the Ohio Utica Shale (see Crosstex Energy to Build New Compressors, Processing Plant in OH). At the time Crosstex said they had secured a $75 million line of credit and were investing $50 million of it in the jv. Scratch that. Yesterday Crosstex announced they’re investing another $25 million in the jv, so it looks to us like they’re using up the rest of their line of credit to do it.

The Crosstex announcement:
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Crosstex Energy to Build New Compressors, Processing Plant in OH

Crosstex Energy has formed a joint venture with Enerven Compression Services called E2 to build and operate new compressor stations and a condensate processing plant in the Ohio Utica Shale. In their announcement today, Crosstex says the company has set up a new $75 million line of credit and will invest an initial $50 million from it in the new JV. First up is building two compressor stations in Noble and Monroe counties in Ohio—they already have an unnamed customer lined up for those. After that, they’ll build a condensate (“natural gasoline”) processing plant. Crosstex will own 93% of the JV and Enerven will own the other 7%.

The Crosstex announcement from this morning:

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