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NGL Energy, High Sierra Groups to Merge in $693M Deal

Propane player NGL Energy Partners LP announced Monday that it has signed merger agreements with two High Sierra (HSE) entities, creating a diversified company through a cash and stock deal valued at $693 million, less assumed net debt.

Under the terms of the deal, Tulsa-based NGL Energy will exchange stock and contribute cash for equity in High Sierra Energy LP and its general partner, High Sierra GP LLC, both based in Denver. The deal is expected to close in June, at which time NGL Energy said it expects the equity portion to total approximately $433 million and the cash portion about $150 million.

HSE handles transportation and marketing for natural gas liquids (NGL) and crude oil, and is also involved in the transportation, treatment, disposal and recycling of water used in hydraulic fracturing (fracking). HSE's NGL business leases more than 2,000 rail cars, owns six transloaders and leases four rail sites that collectively can move approximately 45,000 b/d of NGL from coast to coast. In crude oil, HSE handles about 50,000 b/d and controls 32 pipeline injection facilities, three crude oil terminals -- two of which provide barge service -- and about 90 tractor-trailers.

HSE also handles more than 80,000 barrels of fracking wastewater per day, most of which (60,000 b/d) are processed through a recycling plant in the Pinedale Anticline of Wyoming. HSE owns seven disposal plants -- two of which include treatment and recycling facilities -- in the Niobrara crude oil play in the Denver-Julesburg (DJ) Basin. HSE also owns a transportation and fracking tank rental operation, with 50 tractor-trailers, in the Mississippian Lime crude oil play in Oklahoma and Kansas.

"Combining [NGL Energy] and High Sierra creates a dynamic and diversified mid-cap MLP that will provide multiple services to upstream customers," said NGL Energy CEO H. Michael Krimbill. "We will be a full service midstream solution for gas plant and fractionation operators, crude oil producers, refiners and retailers across the country."

James J. Burke, CEO of HSE concurred. "This merger has great synergies and creates a diversified midstream company with multiple solutions for the producer operating in some of the country's most prolific oil and gas plays," he said. "This will enable us to expand our geographic footprint and exploit the vast opportunities in the exploding water and crude oil arenas. We could not ask for a better fit between the two companies."

HSE's operations will form three of the merged company's four business segments. NGL Energy's propane business will be the fourth segment.

The deal is contingent upon several factors, including the approval of HSE shareholders and the expiration of the waiting period required by the Hart-Scott-Rodino Act.

NGL Energy acquired the NGL assets of SemGroup Corp.'s SemStream LP last fall in a deal worth about $283 million (see Shale Daily, Sept. 6, 2011). NGL Energy was formed one year earlier through the merger of Hicksgas and NGL Supply.

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