Propane company NGL Energy Partners LP had its eye on North America's expanding liquids-rich shale plays when it agreed to acquire the natural gas liquids (NGL) assets of SemGroup Corp.'s SemStream LP in a deal worth about $283 million.
The assets include 12 NGL terminals in Arizona, Arkansas, Indiana, Minnesota, Missouri, Montana, Washington and Wisconsin, with more than 12 million gallons of above-ground propane storage, 3.7 million bbl of underground leased storage for NGLs, and a rail fleet of about 350 leased and 12 owned cars.
"These assets and operations will provide balance between our business segments and continue the geographic expansion of our operation. This will position NGL [Energy] to take advantage of opportunities arising from the expanding liquids-rich shale plays throughout North America," said Brian Pauling, COO of the company's midstream division.
NGL Energy said it will issue 8,950,000 common units to SemStream for the assets. In addition, up to a maximum of $100 million in cash will be paid in connection with working capital acquired. The cash working capital payment will be financed from borrowings under NGL Energy's amended revolving credit facility. The deal is subject to antitrust clearance and other customary closing conditions and is expected to close in the fourth quarter. NGL Energy expects the transaction to be accretive to its unitholders.
SemStream will acquire an interest in the general partner of NGL Energy and will have the right to appoint two members to the board of directors of the general partner.
"This transaction will increase the number of terminals owned by the partnership from three to 15, significantly expanding our midstream segment from the Midcontinent to the West Coast, including Washington and Arizona," said Stephen Tuttle, president of NGL Energy's midstream division. "These assets generate fee-based revenues and complement our current wholesale supply and marketing business."
NGL Energy was formed in September 2010 through the merger of Hicksgas and NGL Supply, and owns and operates a vertically integrated energy business with three segments: midstream, wholesale supply and marketing, and retail propane.