Summit Midstream Partners LP (NYSE: SMLP) said Feb. 25 it has entered into an agreement with Summit Midstream Partners LLC to acquire all its operating assets through a dropdown.
The total transaction is estimated at $1.2 billion. Consideration is structured as a $360 million initial payment and a deferred payment estimated at about $800 million to $900 million due in 2020.
The assets include all of the issued and outstanding membership interests of Summit Utica, Meadowlark Midstream and Tioga Midstream. In addition, SMLP will acquire a 40% equity interest in each of Ohio Gathering and Ohio Condensate.
The transaction will enhance SMLP's growth profile with 80-90% of the adjusted EBITDA contribution coming from the high-growth Utica Shale.
"With this transaction, SMLP is being transformed from a dropdown story into an organic growth story with more than 20% of SMLP's expected 2016 adjusted EBITDA originating from our fee-based gathering services in the Utica," Steve Newby, president and CEO of SMLP, said in a statement.
According to Newby, the dropdown also diversifies the company's customer base and enhances relationships with, or adds, several strong and well capitalized counterparties into SMLP's customer portfolio. Customers will include Gulfport Energy Corp. (NASDAQ: GPOR), XTO Energy Inc., EOG Resources Inc. (NYSE: EOG) and Hess Corp. (NYSE: HES).
Together, the customers represent more than 70% of the volumes associated with the dropdown assets, Newby added.
In conjunction with the dropdown, SMLP has increased its revolving credit facility to $1.25 billion from $700 million.
The transaction, which SMLP expects to be immediately accretive to distributable cash flow on a per unit basis, is expected to close in March.
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