DTE Energy to buy midstream natgas assets

OREANDA-NEWS. September 28, 2016. DTE Energy will buy two natural gas gathering systems in the Appalachia region for \\$1.3bn in a bid to boost its existing midstream footprint there.

DTE Energy is purchasing the Appalachia Gathering System and a 40pc interest in the Stonewall Gas Gathering (SGG) from M3 Midsteam and will purchase 15pc of SGG from Vega Energy.

Natural gas industry merger and acquisition activity could rise in the coming months as debt and equity markets open up following a modest recovery in natural gas prices. Prices fell to 17-year lows below \\$1.65/mmBtu in March but have since recovered, reaching a 20-month settlement high of \\$3.057/mmBtu on 21 September.

DTE's new assets gather natural gas produced in the southwest portion of the Marcellus shale and provide access to multiple markets, including the Great Lakes region, via Columbia Gas Transmission, Texas Eastern Transmission and the planned Nexus Gas Transmission project. The Marcellus shale is leading a rebound in gas drilling amid higher prices. Gross gas output from the top US gas-producing field by volume in August was up by about 6pc from a year earlier.

This acquisition follows suit of other utilities growing their midstream footprints to support longer-term growth in an environment of little to no load growth, investment bank Tudor Pickering Holt said. The upside of the deal will be heavily dependent on the completion of the Nexus pipeline project, the bank said.

Spectra Energy and DTE Energy are lead developers on the 1.5 Bcf/d (42mn m?/d) greenfield pipeline project. Nexus would connect markets in northern Ohio, southeastern Michigan and Ontario, Canada, with supplies from Appalachia via 256 miles (412km) of pipeline. Columbia Gas Transmission has contracted for 48mn cf/d of firm transportation on the line, with DTE Energy committed to up to 150mn cf/d. The US Federal Energy Regulatory Commission is expected to issue a final environmental review of the project in November, and the project's developers plan for it to be in service in November 2017.

DTE Energy's acquisitions are expected to be completed in the fourth quarter.