Regency Energy Partners LP has announced it will acquire Southern Union Gathering Company LLC, the owner of Southern Union Gas Services Ltd., from Southern Union Company, a jointly owned affiliate of Energy Transfer Equity LP and Energy Transfer Partners LP. The $1.5 billion acquisition will expand Regency’s presence in the Permian Basin. The acquisition is expected to close in the second quarter of 2013, subject to approval under the Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions.
The transaction will include the purchase of a 5,600-mile gathering system and approximately 500 million cubic feet (MMcf) per day of processing and treating facilities in west Texas and New Mexico for natural gas and natural gas liquids. In addition, SUGS is currently finishing construction of the 200 MMcf per day Red Bluff processing plant with associated treating which is expected to be in service in the second quarter of 2013. An additional 200 MMcf per day cryogenic processing facility with associated treating is in the planning stages and is expected to be in service in mid-to-late 2014.
“This acquisition represents a significant growth opportunity for Regency and is very strategic to our plans for expansion in the Permian Basin,” Mike Bradley, president and chief executive of Regency Energy Partners, said in a release. “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.”
Regency will finance the acquisition by issuing $900 million of new Regency units to Southern Union Company, comprised of $750 million of new common units and $150 million of new Class F common units. The Class F common 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 will be paid in cash funded from long-term borrowings.
In addition, in conjunction with the transaction, ETE, which owns the general partner and incentive distribution rights of Regency, has agreed to forgo the incentive distribution rights payments associated with the new common units issued by Regency for the equivalent of eight consecutive quarters post-closing and to eliminate the $10 million annual management fee due from Regency for two years post-closing.
J.P. Morgan acted as sole financial advisor and Locke Lord LLP acted as legal counsel to Regency with respect to the transaction. Evercore Partners acted as sole financial advisor and Akin Gump Strauss Hauer & Feld LLP acted as legal counsel to Regency’s Conflicts Committee with respect to the transaction.
Recommended Reading
Deep Well Services, CNX Launch JV AutoSep Technologies
2024-04-25 - AutoSep Technologies, a joint venture between Deep Well Services and CNX Resources, will provide automated conventional flowback operations to the oil and gas industry.
EQT Sees Clear Path to $5B in Potential Divestments
2024-04-24 - EQT Corp. executives said that an April deal with Equinor has been a catalyst for talks with potential buyers as the company looks to shed debt for its Equitrans Midstream acquisition.
Matador Hoards Dry Powder for Potential M&A, Adds Delaware Acreage
2024-04-24 - Delaware-focused E&P Matador Resources is growing oil production, expanding midstream capacity, keeping debt low and hunting for M&A opportunities.
TotalEnergies, Vanguard Renewables Form RNG JV in US
2024-04-24 - Total Energies and Vanguard Renewable’s equally owned joint venture initially aims to advance 10 RNG projects into construction during the next 12 months.
Ithaca Energy to Buy Eni's UK Assets in $938MM North Sea Deal
2024-04-23 - Eni, one of Italy's biggest energy companies, will transfer its U.K. business in exchange for 38.5% of Ithaca's share capital, while the existing Ithaca Energy shareholders will own the remaining 61.5% of the combined group.