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Inergy Midstream to acquire the COLT crude oil logistics hub

Inergy Midstream LP and the owner of its general partner, Inergy LP, announced that Inergy Midstream has executed a definitive agreement to purchase Rangeland Energy LLC, the owner and operator of the COLT crude oil rail terminal, storage, and pipeline facilities for $425 million, subject to certain performance milestones and customary working capital adjustments.

Inergy Midstream has entered into an agreement to sell $225 million of common units in a private placement and has obtained committed unsecured debt financing to fund the balance of the acquisition purchase price.

The COLT Hub is strategically located near the town of Epping in Williams County, North Dakota, in the heart of the Bakken and Three Forks shale oil producing areas. The COLT Hub provides producers, refiners, and marketers with the largest open-access crude oil distribution hub in North Dakota. With 720,000 barrels of crude oil storage and two 8,700-foot rail loops, the COLT Hub can accommodate 120-car unit trains and is capable of moving more than 120,000 barrels per day by rail.

COLT’s customers can source product via the eight-bay truck unloading rack, the COLT Connecter, a 21-mile, 10-inch bi-directional pipeline that connects the COLT Hub to the Enbridge and Tesoro pipelines at Dry Fork (Beaver Lodge/Ramberg junction), the Banner gathering system, and a planned connection to the Bear Tracker Energy gathering system.

“We are excited to announce the acquisition of a vital midstream asset in one of the most compelling shale basins in North America,” says John Sherman, president and chief executive officer of Inergy Midstream. “The COLT Hub diversifies Inergy Midstream’s cash flow, expands our geographic footprint, complements our existing operations, and should lead to further expansion opportunities for our investors.”

Approximately 90% of the expected revenue at the COLT Hub will be derived from “take or pay” contracts that average 3.9 years in tenor and are with credit-worthy counterparties. These contracts underpin a growing and stable cash flow stream that is expected to be immediately accretive to distributable cash flow per common unit.

The COLT Hub acquisition is an expansion of Inergy Midstream’s shale-focused infrastructure portfolio and a natural extension of Inergy’s refinery and producer-services businesses. Additionally, the COLT Hub has a first-mover advantage in the Bakken and should lead to incremental crude oil and NGL investments.

“The COLT Hub is an attractive asset that provides refiners with crucial access to Bakken-sourced crude oil and offers producers reliable takeaway capacity to premium demand markets,” said Bill Gautreaux, president of Inergy Services. “We are excited to acquire and grow this business.”

To fund the Rangeland acquisition, Inergy Midstream has entered into an agreement with institutional investors to sell $225 million of common units in a private placement concurrent with, and conditioned upon, the closing of the transaction. Institutions participating in the private placement are funds managed by Kayne Anderson Capital Advisors LP, FAMCO MLP, a division of Advisory Research Inc, Tortoise Capital Advisors LLC, and Magnetar Capital, among others. In addition, Inergy Midstream has obtained $225 million of committed unsecured debt financing from Citigroup Global Markets Inc and JP Morgan.

Jefferies & Company, Inc. acted as sole financial advisor to Inergy Midstream in connection with the transaction. The transaction is expected to close in early December of 2012, subject to approval under the Hart-Scott-Rodino Act and other customary closing conditions.

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