To accelerate upstream development by its U.S. onshore exploration business, Tulsa-based Unit Corp. agreed Thursday to sell a half-stake in natural gas processing subsidiary Superior Pipeline Co. LLC for $300 million.
SP Investors Holdings LLC, which is buying the stakes, is jointly owned by OPTrust and funds managed/advised by Partners Group, an investment manager.
Superior, with processing capacity of 340 MMcf/d, buys, gathers and treats natural gas through three treatment plants, 13 processing plants, 22 active gathering systems and about 1,455 miles of pipeline. Superior and its subsidiaries operate in Oklahoma, Texas, Kansas, Pennsylvania, and West Virginia.
"The transaction, which implies a value for the midstream segment of $600 million, not only recognizes the significant value that Unit has already created with Superior but gives our partners and Unit the opportunity to continue to expand Superior,” said Unit CEO Larry Pinkston. “Additionally, the structure allows Unit to retain day-to-day operational control, a feature that provides economic and technical support to Unit's ongoing exploration and production segment.
Superior's employees would join Unit subsidiary Superior Midstream Operating LLC, which would operate the business after the closing, now expected in early April.
Proceeds from the sale would be used to increase the drilling program of Unit's upstream subsidiary, Unit Petroleum Co., as well as to make additional capital investments in Superior.
Unit Petroleum today primarily works in the Anadarko and Arkoma basins. At the end of 2017 it owned an estimated 150 million boe of reserves with an interest in more than 6,400 wells.
“Our goal at Unit is to focus on growing our various business segments while maintaining a capital expenditures program in-line with our available cash,” Pinkston said. “Through this transaction, we now have significant capital partners invested with us in our midstream business with the objective of accelerating Superior's growth.
“Also, the increased drilling pace of our exploration segment will enhance our production and reserve growth and the throughput on some of Superior's existing systems. We believe that this transitional transaction is a key step to help accelerate the growth of our business while continuing to maintain the capital discipline our shareholders expect."
Unit was advised by Tudor, Pickering, Holt & Co. on financial matters and Vinson & Elkins LLP on legal matters.