Looking Back
Falcon’s roots trace back to October 2000, when Energy Spectrum Partners capitalized the company with a $5 million convertible note. Its first month in business, Falcon acquired its first storage facility, the Worsham-Steed storage field, 50 miles northwest of Fort Worth.

Hill-Lake, located in Eastland County, Texas, operated as a producing oil field until the mid-1960s when Lone Star Pipeline Co. converted it into a single-cycle gas storage facility with 5 bcf of working gas capacity and 50,000 mcfd of withdrawal capability.

In April 2001, Falcon acquired the Hill-Lake storage facility, and began Phase I of an expansion project connecting Hill-Lake to two 36-inch pipelines.

A few months later, the company entered into a joint venture with Greyhawk Gas Storage Co., a Canadian utility company, to develop HDMC storage reservoirs in New York, Wykoff Gas Storage and Worsham-Steed.

When Phase I of the Hill-Lake expansion project was completed in February 2002, Falcon was able to start providing high deliverability multi-cycle storage services and capacity was fully subscribed by the end of the year. Also by the end of the year, Falcon completed its acquisition of the MoBay Storage Hub project in Alabama, which, when completed, will be one of the largest, most southeasterly-located HDMC gas storage facilities in the United States, the company notes.

Falcon sold its Greyhawk in early 2005 in order to focus on the continued expansion of its Hill-Lake facility. After investing a total of $35 million in Falcon over a five-year period, in July 2005 Energy Spectrum sold its ownership stake in Falcon to Arcapita Bank, B.S.C., a Bahrain-based private equity company with a range of worldwide investments totaling in excess of $17 billion. Since then, Arcapita has invested more than $150 million in Falcon and its various gas storage projects in north Texas, Alabama and New Mexico.

Additional funding for Falcon’s north Texas projects came from a $335 million bank loan package. According to a company statement, the financing consists of a $280 million construction and term loan facility and a $55 million revolver that has been used to complete the Phase II and Phase III expansions of the company’s Hill-Lake Gas Storage Facility in Eastland County, as well as the Phase I and Phase II expansions of the company’s Worsham-Steed Gas Storage Facility in Jack County. The company expects to access similar bank financing arrangements for its MoBay storage project in Alabama and its Desert Southwest storage project in New Mexico.

“Customer response for gas storage capacity in the north Texas market has been tremendous,” CEO Jeff Foutch said in a statement. “We have firm multi-year contracts covering over 80 percent of our working gas storage capacity at Worsham-Steed, which has provided the means to underwrite and build a large-volume, high-pressure gas pipeline.

“Our new pipeline has been designed to give our storage customers significant additional take-away capacity and to provide new transportation alternatives to gas producers and other shippers in the Barnett Shale.”

Falcon’s 60-mile Worsham-Steed Pipeline traverses the western portion of the prolific Barnett Shale gas play and runs southward from the Worsham-Steed storage facility through Jack, Parker and Hood counties, where it interconnects with the two major 36-inch gas transmission pipelines that serve north Texas.

“The market liquidity in this area will continue to improve as more of these large-diameter pipelines are built,” Foutch added. “Our Worsham-Steed Pipeline will benefit not only our gas storage customers and gas consumers in the Dallas/ Fort Worth market region, but it also will provide new transportation options and capacity for Barnett Shale gas producers, gas processors and other prospective shippers located in proximity to our pipeline. Everybody benefits from more pipeline interconnectivity and transportation choices.”

In addition to the expansion of Falcon’s two NorTex gas storage projects, the construction and term loan also is being used to finance the fabrication and installation of two 60,000 mcfd cryogenic gas processing plants designed to recover up to an aggregate total of 240,000 gallons per day of natural gas liquids (NGLs) from both gas storage reservoirs; the expansion of crude oil production operations at both facilities, including an enhanced oil recovery (EOR) project at Worsham-Steed; and the recovery of crude oil produced in association with gas storage operations at both locations.

The remaining $55 million in financing consists of a working capital facility that will be used to purchase, hedge and trade working gas storage inventory as well as for additional capital expenditures and for general corporate purposes, the company states.

“The bank financing represented the next big step for us in implementing our business strategy,” Hopper said in a statement. “We’ve been involved for over six years in gas storage development and operations activity in north Texas. The financing has allowed NorTex to complete the full-phase expansions at both Hill-Lake and Worsham-Steed, as well as construction of a new 450,000 mcfd take-away pipeline in the Barnett Shale, in order to meet the growing demand for HDMC gas storage services and gas transportation services in the rapidly expanding north Texas energy market.

“It also has enabled NorTex to fully exploit the extraordinary economic potential of the Hill-Lake and Worsham-Steed storage reservoirs by expanding the gas processing, natural gas liquids and crude oil production activities NorTex conducts in association with its gas storage operations in north Texas.”

In January last year, Falcon also announced that its MoBay Storage Hub project in southern Alabama received a Certificate of Public Convenience and Necessity under Section 7 of the Natural Gas Act from the Federal Energy Regulatory Commission (FERC). This certificate authorizes MoBay to develop and operate the project.

According to a company statement, the MoBay Storage Hub will provide 50 bcf of working gas and 1.0 bcfd of injection and withdrawal capacity at Coden, Ala. The MoBay header system will provide direct, bi-directional receipt and delivery points with the Florida Gas Transmission (FGT) pipeline, Gulfstream pipeline, Gulf South pipeline and Transco pipeline. Via backhaul or displacement, MoBay shippers will be able to access the expanded Destin pipeline system.

“MoBay will offer firm and uninterruptible storage, balancing, wheeling, parking and loaning services at market-based rates,” the company says. “Future receipt points may include the four gas processing plants at Coden (1.3 bcfd) and the proposed 1.14 bcfd Southeast Supply Header project planned to connect with the Gulfstream, FGT, Gulf South, Southern Natural Gas Company, Columbia Gulf Transmission, Centerpoint Energy Gas Transmission, Texas Eastern Transmission and Tennessee Gas pipelines.”