Laredo Petroleum to sell pipeline

Tulsa-based Laredo Petroleum announced Monday that it has agreed to sell its interest in the Medallion pipeline.

Global Infrastructure Partners will purchase Medallion Gathering and Processing LLC from Laredo and The Energy and Minerals Group for $1.8 billion plus additional cash consideration.

Laredo owns 49 percent interest and stands to earn approximately $825 million if the sale closes.

“In late 2013, we made our initial investment in MGP, creating a partnership to build a pipeline system to provide Laredo access to multiple sales points for its oil,” said Laredo Chairman and CEO Randy A. Foutch. “This eventually grew into the premier pipeline system in the Midland Basin.

“Upon the closing of this transaction, Laredo will recognize proceeds of more than three times its invested capital, equivalent to an internal rate of return of more than 65 percent, and, through our various ongoing contracts with Medallion, retain the strategic benefits that were the initial goal for building the system.”

Laredo intends to use the proceeds from the sale to pay down outstanding debt, cutting it by more than half.

“We anticipate interest savings from the debt reduction to better align operating cash flow with capital expenditures,” Foutch said. “Based upon the current environment for commodity prices, service costs, forecasted rig cadence and production growth, we expect operating cash flow to increase sequentially, with the Company anticipating being approximately cash flow neutral by the end of 2019.”