EnCap Flatrock Midstream Completes Two Transactions with Plains All American

Rhea-AI Summary

EnCap Flatrock Midstream (EFM) has announced two definitive agreements to sell Ironwood Midstream Energy Partners II and all EFM-owned Plains Series A Preferred Units to Plains All American (NYSE: PAA) for over $800 million in cash. The transactions are expected to close in Q1 2025, subject to regulatory approvals.

Ironwood II, headquartered in San Antonio, operates a crude oil gathering and transportation system in the Eagle Ford shale region of South Texas. Since partnering with EFM in 2019, the company has built nearly 500 miles of pipeline, covering approximately 200 miles within the Eagle Ford Shale region. The company executed an Eagle Ford-focused consolidation strategy to become a leading midstream provider in South Texas.

RBC Capital Markets and Piper Sandler served as financial advisors, while Haynes Boone, Wilkie Farr & Gallagher, and Vinson & Elkins acted as legal advisors for the transaction.

Positive

• Transaction value of over $800 million in cash
• Strategic sale of assets in the Eagle Ford shale region
• Successful execution of consolidation strategy with 500 miles of pipeline infrastructure

Negative

• None.

Insights

Financial Analyst

The $800 million acquisition of Ironwood II and Plains Series A Preferred Units represents a strategic consolidation move for Plains All American (PAA). The deal strengthens PAA's position in the Eagle Ford shale region through Ironwood II's extensive 500-mile pipeline network, which covers 200 miles in the core area. This infrastructure integration will enhance PAA's operational efficiency and market presence in South Texas.

The transaction's valuation appears reasonable given the quality of assets and their strategic location. The Eagle Ford shale remains a key production region and controlling these midstream assets will provide PAA with steady cash flows from gathering and transportation services. The deal structure, being all-cash, indicates PAA's strong liquidity position and confidence in the assets' value proposition.

For investors, this acquisition signals PAA's commitment to growth and operational optimization. The consolidation should lead to cost synergies and improved margins through increased system utilization and operational integration. The timing aligns with the broader industry trend of midstream consolidation to achieve scale benefits.

Energy Infrastructure Specialist

The strategic significance of this acquisition lies in the Eagle Ford shale's continued importance as a major U.S. production basin. Ironwood II's infrastructure footprint, developed through a targeted consolidation strategy since 2019, represents a valuable addition to PAA's existing network. The integration will create a more comprehensive gathering and transportation system, potentially reducing bottlenecks and improving service reliability for upstream customers.

The deal's structure also includes the purchase of EFM-owned Plains Series A Preferred Units, which will simplify PAA's capital structure. This dual-transaction approach demonstrates PAA's strategic planning in both expanding operational capabilities and optimizing its financial structure. The expected Q1 2025 closing provides sufficient time for regulatory approvals while maintaining momentum in the consolidation process.

Transactions net combined cash proceeds to EFM of over $800 million

SAN ANTONIO--(BUSINESS WIRE)-- EnCap Flatrock Midstream (“EFM”) today announced the execution of two separate definitive agreements to sell Ironwood Midstream Energy Partners II, LLC (“Ironwood II” or the “Company”) and all EFM-owned and outstanding Plains Series A Preferred Units to Plains All American, L.P. (NYSE: PAA) for over $800 million in cash. The transactions are expected to close in the first quarter of 2025, subject to customary closing conditions, including regulatory approvals.

“This is an exciting time for the midstream industry, and we’re grateful for the opportunity to monetize our midstream investments and unlock value for our investors,” said EFM Managing Partner Gregory C. King. “Our focus every day is to be good partners, good stewards of our investors’ capital, and build great assets. We look forward to continuing to execute on that vision as we look ahead to the remainder of this year and beyond.”

Headquartered in San Antonio, Ironwood II is a premier crude oil gathering and transportation system with an expansive footprint servicing a diverse set of upstream customers operating in the Eagle Ford shale region of South Texas. The Company partnered with EFM in 2019 to pursue an Eagle Ford-focused consolidation strategy, and thanks to Ironwood II’s exceptional team, executed on that strategy to become a best-in-class midstream provider in South Texas.

Advisors

RBC Capital Markets served as financial advisor and Haynes Boone as legal advisor to Ironwood Midstream, and Wilkie Farr & Gallagher as EFM’s legal advisor. Piper Sandler served as financial advisor and Vinson & Elkins served as legal advisor to Plains All American.

About Ironwood Midstream Energy Partners II

Ironwood Midstream Energy Partners II (“Ironwood II”), a privately held midstream company based in San Antonio, Texas, specializes in the development of U.S. crude oil and natural gas gathering and transportation infrastructure. Leveraging its expertise, the Ironwood II team has successfully acquired and constructed nearly 500 miles of pipeline, covering approximately 200 miles within the core of the Eagle Ford Shale region in South Texas.

About EnCap Flatrock Midstream

EnCap Flatrock Midstream provides value-added growth capital to proven management teams focused on midstream infrastructure opportunities across North America. The firm was formed in 2008 by a partnership between EnCap Investments L.P. and Flatrock Energy Advisors, LLC. Based in San Antonio with offices in Oklahoma City and Houston, the firm manages investment commitments of over $9 billion from a broad group of prestigious institutional investors. For more information, please visit www.efmidstream.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250107943638/en/

Media

Kelly Kimberly / Nick Rust

FGS Global

kelly.kimberly@fgsglobal.com / nicholas.rust@fgsglobal.com

713.822.7538 / 917.439.0307

Source: EnCap Flatrock Midstream

FAQ

What is the value of Plains All American's acquisition of Ironwood Midstream and EFM's preferred units?

Plains All American (PAA) is acquiring Ironwood Midstream Energy Partners II and EFM's Plains Series A Preferred Units for over $800 million in cash.

When is the Plains All American (PAA) acquisition of Ironwood Midstream expected to close?

The transaction is expected to close in the first quarter of 2025, subject to customary closing conditions and regulatory approvals.

How many miles of pipeline infrastructure does Ironwood Midstream II operate in the Eagle Ford region?

Ironwood Midstream II has constructed nearly 500 miles of pipeline, with approximately 200 miles within the core of the Eagle Ford Shale region in South Texas.

What assets are included in Plains All American's (PAA) acquisition from EnCap Flatrock Midstream?

The acquisition includes Ironwood Midstream Energy Partners II, a crude oil gathering and transportation system, and all EFM-owned Plains Series A Preferred Units.