Howard Midstream Energy Partners (HEP) has signed a $563m joint venture (JV) agreement with WPX Energy to develop crude oil and natural gas gathering and processing infrastructure in the core of the Delaware Basin in the US.

Under the 50/50 JV deal, Howard will make an initial payment of $300m to WPX Energy and subsequently fund $263m to finance the capital expenditure of the project.

As part of the programme, HEP will complete the construction of a 50-mile crude oil gathering system and build a new cryogenic natural gas processing complex, with an initial capacity of 400 million cubic feet per day.

HEP is also responsible for building associated natural gas and product pipelines and will serve as operator of the assets.

The area of mutual interest under the JV covers more than 600 square miles in Lea and Eddy Counties, New Mexico and Reeves and Loving Counties, Texas, with 50,000 net acres currently dedicated by WPX.

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Howard Energy Partners chairman and CEO Mike Howard said: “This JV not only diversifies HEP’s footprint into the most prolific basin in the nation, but it demonstrates our team’s ability to differentiate ourselves among our competitors and to raise significant capital for large-scale infrastructure projects.

“We are confident that our midstream operational expertise, coupled with strong financial support and WPX’s production track record, will make for a successful partnership in the Delaware.”

The closure of the transaction is subject to certain closing conditions and is expected in the third quarter of this year.

"We are confident that our midstream operational expertise, coupled with strong financial support and WPX’s production track record, will make for a successful partnership in the Delaware."

Prior to this, the parties will begin work on the cryogenic processing plant.

WPX has already installed half of the planned 50-mile crude gathering system.

The pipeline is expected to have a capacity of around 125,000 barrels of oil per day and is slated for completion in the first half of next year.

With regard to the cryogenic natural gas processing complex, the first 200 million cubic feet a day train is expected to be completed in the first half of next year, while work on the second train is scheduled to be completed by the middle of 2019.

Image: Active Permian Basin pumpjack east of Andrews, Texas. Photo: courtesy of Zorin09/Wikipedia.