Regency Energy Partners LP is adding to its midstream asset collection a 5,600-mile gas gathering system and about 500 MMcf/d of processing and treating facilities in West Texas and New Mexico for natural gas and natural gas liquids with a deal that gives it Southern Union Gas Services Ltd. (SUGS).

Additionally, SUGS is finishing construction of the 200 MMcf/d Red Bluff processing plant with associated treating, and it is expected to be in service in the second quarter. An additional 200 MMcf/d cryogenic processing facility with associated treating is in the planning stages and is expected to be in service in mid-to-late 2014.

Regency is buying Southern Union Gathering Co. LLC from Southern Union Co. Southern Union Co. is a jointly owned affiliate of Energy Transfer Equity LP and Energy Transfer Partners LP (see Daily GPI, May 11, 2012; March 27, 2012; June 17, 2011).

“The $1.5 billion acquisition will significantly expand Regency’s presence in one of the most productive oil and liquids-rich basins in North America, the Permian Basin,” the partnership said. The deal is expected to close during the second quarter, subject to antitrust approval and other conditions.

“This acquisition represents a significant growth opportunity for Regency and is very strategic to our plans for expansion in the Permian Basin,” said Regency Energy Partners CEO Mike Bradley. “The integration of the SUGS assets with our existing operations will position Regency with a broad Permian Basin gathering and processing footprint. The combined system is expected to provide significant synergies, increase efficiencies on our current system, improve the flexibility of our gathering and processing operations and enhance services for our customers.”

Bradley said the acquisition will be neutral to slightly accretive in 2013 and will enhance the outlook for long-term distribution growth.

Regency said it will issue $900 million of new units to Southern Union, composed of $750 million of new common units and $150 million of new Class F common units. The Class F units will be equivalent to common units except will not receive distributions for the equivalent of eight consecutive quarters post-closing. The remaining $600 million is to be paid in cash funded from long-term borrowings.

Southern Union recently sold the gas utilities Missouri Gas Energy and New England Gas Co. (see Daily GPI, Feb. 13; Dec. 18, 2012).

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