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Sanchez Midstream Expanding Midstream JV with Targa Resources in South Texas

Sanchez Midstream Partners L.P., May 23, 2018

Sanchez Midstream Partners LP (“SNMP” or the “Partnership”) has executed a series of agreements with Targa Resources Corp. (“Targa”) pursuant to which the parties have merged their respective 50 percent interests in the entities that own the high pressure Carnero Gathering Line and Raptor Gas Processing Facility to form an expanded 50/50 joint venture in South Texas (the “Carnero JV”).

In addition to owning the Raptor Gas Processing Facility, the Carnero JV has acquired Targa’s 200 million cubic feet per day (“MMcf/d”) Silver Oak II Gas Processing Plant (“Silver Oak II”), located in Bee County Texas, which expands the processing capacity of the joint venture from 260 MMcf/d to 460 MMcf/d, and owns the full capacity of the Carnero Gathering Line, which has a design limit (without compression) of 400 MMcf/d.  Additional enhancements to the parties’ prior joint ventures include new dedication of over 315,000 gross Comanche acres in the Western Eagle Ford, operated by Sanchez Energy Corporation (“Sanchez Energy”), under a new long-term firm gas gathering and processing agreement.  The agreement with Sanchez Energy, which has been approved by all of the unaffiliated Comanche working interest partners, establishes commercial terms for the gathering of gas on the Carnero Gathering Line and processing at the Raptor Gas Processing Facility and Silver Oak II.  Prior to execution of the agreement, Comanche volumes were gathered and processed on an interruptible basis, with the processing capabilities of the joint ventures limited by the capacity of the Raptor Gas Processing Facility.

MANAGEMENT COMMENTARY
Having completed the transformation of SNMP to a midstream master limited partnership in 2017, we have worked diligently over the last several months to expand the Partnership’s opportunity set in South Texas,” said Gerry Willinger, Chief Executive Officer of the general partner of SNMP.  “As a result of this effort, we are pleased to announce an expansion of the Partnership’s joint venture with Targa in South Texas."

The Carnero JV enhances our midstream strategy, secures and expands our third-party volumes, and is expected to provide additional stable, fee-based cash flow to the Partnership over time.  The structure of the transaction greatly simplifies our previous joint ventures with Targa, which facilitates greater operating efficiencies and provides a solid platform for the continuing growth of the Carnero JV in South Texas.  The transaction is expected to be immediately accretive to the Partnership, with benefits that increase as the joint venture services the needs of Sanchez Energy and other producers and marketers in South Texas," Willinger added.

Willinger went on to say “because the Partnership’s joint ventures with Targa previously processed gas from the Comanche asset on an interruptible basis, we do not currently anticipate that the new joint venture with Targa will result in a material impact on the full year 2018 forecast released by the Partnership last week.  That being said, by adding Silver Oak II and the additional capacity of the Carnero Gathering Line to the Carnero JV, our South Texasmidstream assets, which include Western Catarina Midstream and the Seco Pipeline, are strategically positioned to capture the increase in volumes from the significant development activity underway in the Western Eagle Ford without spending any incremental development dollars.  As we anticipate increasing volumes through our expanded system in 2018 and the years to come, we have preemptively put ourselves in a position to continue to grow the Partnership while being disciplined with capital.  Accordingly, we see the new, expanded joint venture as a key step in positioning the Partnership for continued growth in South Texas.” 

About Sanchez Midstream

Sanchez Midstream Partners LP is a growth-oriented publicly-traded limited partnership focused on the acquisition, development, ownership and operation of midstream and other energy related assets in North America.  The Partnership has ownership stakes in oil and natural gas gathering systems, natural gas pipelines, and a natural gas processing facility, all located in the Western Eagle Ford in South Texas.


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