Kinder Morgan Buys Hiland; O&G Services M&A Continues

As many analysts had predicted, the level of M&A activity in the energy sector is picking up as it becomes clear that low oil prices are the “new normal”.

On Wednesday, January 22nd, pipeline industry leader Kinder Morgan announced it plans to purchase Hiland Partners, a pipeline and logistics company founded by Continental Resources CEO Harold Hamm some years ago, for around $3 billion.

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Details on Kinder Morgan – Hiland Partners deal

The deal between the two pipeline industry heavyweights is scheduled to become final in the first quarter of this year. Acquiring Hiland will give Kinder Morgan the number one position in pipelines and logistics in the Bakken shale formation. Of note, the $3 billion price tag includes assuming significant debt when falling oil prices are pressuring oil producers.

Kinder Morgan noted in a statement Wednesday that the acquisition will increase its cash available to pay dividends this year and next year.

Separately Kinder Morgan reported quarterly results and announced the retirement of its chief executive in June. Richard Kinder will remain with the company he founded as chairman.

More on Hiland partners

Hiland Partners has become a major player in oil gathering and transportation pipelines and natural gas gathering and processing systems, especially in the Bakken shale oilfields in North Dakota and Montana. Well-known Hiland customers include Continental and Hess and others

Among the assets owned by Hiland is the new Double H 84,000 barrels-per-day pipeline that will transport  Bakken crude from North Dakota to Tallgrass Energy Partners’ Pony Express pipeline in Wyoming. The Bakken crude flows are then transported to the U.S. crude futures hub in Cushing, Oklahoma via the Pony Express pipeline.

The brand new pipeline is expected to start operations within the next two weeks..