Rangeland Energy Returns With $200M Commitment From EnCap Flatrock

January 10, 2013
Dow Jones, LBO Wire

By Jonathan Shieber | Sugarland, Texas

Less than two months after selling its oil and gas rail distribution assets in a $425 million deal, Rangeland Energy LLC is expected to announce it is back in business with a new $200 million commitment from previous investor EnCap Flatrock Midstream.

The management team of the Sugarland, Texas-based midstream infrastructure developer remains intact and the strategy for development is similar, Rangeland Chief Executive Chris Keene said in an interview.

Rangeland will once again be developing infrastructure to gather, store, and transport, crude oil, natural gas, natural gas liquids, and petroleum products by rail and pipeline to refiners and market hubs around the U.S.

"What you're really doing is providing commodities to end users that don't currently have access to that commodity via pipeline," Mr. Keene said.

Historically, the U.S. pipeline system was built to transport oil and gas from the South to the North with not much access to the heavily populated East and West coasts. By creating rail opportunities to transport the oil and gas, companies such as Rangeland give refiners access to crude oil that they wouldn't otherwise have had, said Mr. Keene.

"What it does is make more domestically produced commodity available to the U.S. consumer," he said.

Unlike the company's previous efforts in North Dakota, the newest iteration of Rangeland will look at midstream opportunities in West Texas, the Gulf Coast, and potentially Canada, Keene said.

The U.S. is in the early stages of an unprecedented return to oil and gas productivity, which could see crude production rise 23% this year alone.

As that oil floods the markets in the center of the country, producers will look to move the product to areas where that oil can be sold at higher prices. Typically, the East and West coasts markets are supplied by oil imports and oil and gas coming out of Alaska. The development of these rail transportation hubs means that more domestic crude is sold to refiners in those markets.

Late last year, Rangeland Energy sold its assets to the master limited partnership Inergy Midstream LP, a publicly traded manager of oil and gas distribution assets in a $425 million deal.

The company landed its initial backing from EnCap Flatrock in 2009 when Rangeland received a $115 million commitment from the San Antonio, Texas-based, midstream-focused firm.

In addition to the capital, Rangeland is gaining a new executive: Pat McGannon has joined the firm as a vice president for business development. Mr. McGannon formerly worked with BP Amoco, most recently as the commercial manager for Denali -- the Alaska Gas Pipeline, out of Anchorage.