Trace Midstream acquires LM Energy’s natural gas assets in Northern Delaware Basin

In a major move within the midstream sector, Trace Midstream Partners II, LLC (“Trace”) has finalised the acquisition of LM Energy Delaware, LLC (“LM Energy”)’s natural gas gathering and transportation assets. This acquisition marks a significant step for Trace as it enters the Northern Delaware Basin, an area renowned for its high activity and infrastructure demands.

Trace Midstream Partners II, LLC’s major acquisition

Located in Eddy and Lea counties, New Mexico, LM Energy’s assets include a comprehensive high- and low-pressure gas pipeline system. This system is complemented by extensive infrastructure, including compression, dehydration, condensate handling, and vapor recovery facilities. The assets, currently undergoing expansion, will soon feature approximately 170 miles of pipeline and 12 compressor stations upon completion. This expansion also includes a new 20-inch diameter high-pressure pipeline that will connect existing facilities to key gas processing centres near Loving, New Mexico. The enhanced infrastructure will support a design capacity of 650 million cubic feet per day and cover over 80,000 dedicated acres.

Expansion to alleviate midstream constraints

Trace Midstream’s acquisition is poised to address substantial natural gas midstream constraints in the Northern Delaware Basin. Josh Weber, CEO of Trace, highlighted the strategic importance of the acquisition, stating, “This acquisition marks a significant milestone for Trace as we enter the Northern Delaware Basin. We are excited to build upon LM Energy’s already well-executed system and track record of success.” Trace aims to enhance LM Energy’s existing infrastructure to better serve regional producers facing midstream limitations.

LM Energy’s transition and future prospects

Elliot Gerson, CEO of LM Energy, expressed his gratitude for the successful partnership with customers over the past five years. “It was very important to us to find a successor who would continue to focus on customer service and facilitate our customers’ growth,” Gerson said. He expressed confidence in Trace’s ability to advance the business to new heights, emphasizing their commitment to maintaining high standards of customer service.

Support from Quantum Capital Group and Old Ironsides Energy

Blake Webster, Partner at Quantum Capital Group, expressed enthusiasm for the ongoing partnership with Trace, highlighting their operational and development strengths. “We are confident the commercial, operational, and project development capabilities of the Trace management team, combined with our financial support, will allow Trace to build a scalable natural gas infrastructure platform offering competitive midstream solutions to Delaware producers,” Webster stated.

Sean O’Neill, Managing Partner of Old Ironsides Energy, praised LM Energy’s achievements and the development of a critical midstream solution. “Congratulations to Quantum and the Trace team, who are well-positioned to continue growing this great asset,” O’Neill commented.

Leadership and previous achievements

In connection with the transaction, Jack Harper, Senior Advisor at Quantum, has joined the Trace Board of Directors. Harper, previously an Executive Vice President at ConocoPhillips and President at Concho Resources, brings extensive experience to his new role.

Formed in 2017, Trace Midstream has a track record of success in large-scale midstream projects. Notably, in 2022, the company successfully exited its previous midstream business, selling its Haynesville and Mid-Continent assets to Williams and Energy Transfer, respectively, in transactions valued at approximately $1.5 billion.

Legal and advisory support

Trace Midstream was represented by Vinson & Elkins LLP in the acquisition of LM Energy. LM Energy was advised by Piper Sandler and Co. and Kirkland & Ellis LLP.