Cavalcade Midstream is led by a trio of former NuStar Energy employees. They raised the funds from energy investment firms Pearl Energy Investments of Dallas, Boston-based Old Ironsides Energy and Irving-based NGP.

Cavalcade CEO Rich Reynolds said the company will focus on building gathering lines in the Permian. The lines will deliver oil and gas to main pipelines that will transport them out of the remote region.

“One idea and aspect of the strategy is going into new areas and developing projects that will integrate with a NuStar or other MLPs,” Reynolds said. NuStar is a San Antonio-based pipeline and storage company.

Larger companies such as NuStar, which operates more than 9,700 miles of pipelines and 75 storage terminals across North America and the Caribbean, usually don’t pursue smaller projects like those Cavalcade will focus on, Reynolds said.

The Permian is the largest oil field in the United States and has seen continued growth despite tightening pipeline capacity in the region. Three large crude oil pipelines with a combined capacity of more than 2 million barrels a day are being built out of the Permian to the Texas Gulf Coast to meet growing production.

Cavalcade joins other midstream companies based in San Antonio such as NuStar and privately held Howard Energy, which operates across the U.S. and Mexico.

Unlike Cavalcade, master limited partnerships, or MLPs, such as NuStar, traditionally pay for projects by selling equity or stock. But they have struggled recently to raise capital. In the past year, investors have pushed for MLPs to simplify their business models — they want these partnerships to pay for their expansion with cash flow rather than equity sales.

Until recently, San Antonio-based refiner Valero Energy Corp. operated an MLP, Valero Energy Partners, which managed the refiner’s pipelines and storage operations. Valero announced in October that it would buy the MLP for $950 million and that it would become a subsidiary of the refiner.

Former San Antonio-based refiner Andeavor also operated an MLP, Andeavor Logistics, that was bought by Ohio-based Marathon Petroleum Corp. when it purchased the refiner in October.

Support from private investment firms gives Cavalcade “flexibility and some risk tolerances” that will allow the company to be more nimble, Reynolds said.

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