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Energy Transfer LP has completed its merger with midstream gas operator Crestwood Equity Partners LP in a deal valued at approximately $7.1 billion, including the assumption of $3.3 billion of debt, based on the closing price on August 15.
Energy Transfer now owns and operates more than 125,000 miles of pipelines and related assets in all the major U.S. producing regions and markets across 41 states, “further enhancing its leadership position in the midstream sector”, the partnership said in a news release.
The transaction is immediately accretive to distributable cash flow per unit for Energy Transfer, and adds significant cash flows from firm, long-term contracts, and significant acreage dedications, according to the release. Further, the combined operations of the two companies are expected to generate initial annual run-rate cost and efficiency synergies of at least $40 million before additional anticipated benefits of financial and commercial synergies, Energy Transfer said.
The merger was approved by Crestwood unitholders at its special meeting of unitholders held on October 30. Effective November 3, Crestwood’s common units and preferred units ceased trading on the New York Stock Exchange (NYSE).
Holders of Crestwood common units received 2.07 Energy Transfer common units for each Crestwood common unit held, according to the release. Further, “each outstanding Crestwood preferred unit was, at the election of the holder of such Crestwood preferred unit, either converted into a new preferred unit of Energy Transfer that has substantially similar terms, including with respect to economics and structural protections, as the Crestwood preferred units, redeemed in exchange for $9.857484 in cash plus accrued and unpaid distributions to the date of such redemption, or converted into a Crestwood common unit at a conversion ratio of one Crestwood common unit for ten Crestwood preferred units, and such Crestwood common units then received the common unit merger consideration”, the release stated. The new Energy Transfer preferred units will be Series I Fixed Rate Perpetual Preferred Units and will trade on the NYSE under the ticker symbol ETprI, the partnership said.
According to an earlier statement announcing the acquisition, Crestwood’s system includes gathering and processing assets located in the Williston, Delaware, and Powder River basins, including approximately 2.0 billion cubic feet per day of gas gathering capacity, 1.4 billion cubic feet per day of gas processing capacity and 340 thousand barrels per day of crude gathering capacity.
The statement noted that the transaction would extend Energy Transfer’s position in the value chain deeper into the Williston and Delaware basins while also providing entry into the Powder River basin. “These assets are expected to complement Energy Transfer’s downstream fractionation capacity at Mont Belvieu, as well as its hydrocarbon export capabilities from both its Nederland Terminal in Texas and the Marcus Hook Terminal in Philadelphia, Pennsylvania”, it stated.
Meanwhile, Energy Transfer reported net income attributable to partners of $584 million for the third quarter, compared to $1 billion in the prior-year period. For the three months ended September 30, net income per common unit (basic) was $0.15 per unit, the partnership said in an earnings release. Adjusted EBITDA for the quarter was $3.54 billion, compared to $3.09 billion for the three months ended September 30, 2022.
The partnership posted three new internal records in the third quarter, with natural gas liquid (NGL) fractionation volumes up 9 percent, NGL transportation volumes rising 14 percent, and NGL exports jumping more than 20 percent.
Midstream gathered volumes increased 4 percent, while intrastate natural gas transportation volumes were up 2 percent, and interstate natural gas transportation volumes were boosted 15 percent, the partnership reported. Crude transportation and terminal volumes were up 23 percent and 15 percent, respectively.
In August, Energy Transfer placed into service its eighth fractionator at its Mont Belvieu, Texas facility, bringing its total fractionation capacity at the facility to over 1.15 million barrels per day.
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