Rose Rock Midstream LP (NYSE:RRMS) and SemGroup Corp. (NYSE:SEMG) report that Rose Rock has acquired from SemGroup the remaining one-third interest in SemCrude Pipeline LLC, which owns a 51% interest in White Cliffs Pipeline LLC for $300 million. Rose Rock now owns a 100% interest in SemCrude Pipeline and indirectly owns a 51% interest in White Cliffs Pipeline.
White Cliffs Pipeline is a 527-mile common carrier, crude oil pipeline system that originates in Colorado and terminates in Cushing, Oklahoma. It has a current capacity of 76,000 barrels per day and is in the process of an expansion project which will increase total capacity to 150,000 barrels per day. This project is expected to be completed in August.
The acquisition will be immediately accretive to Rose Rock's distributable cash flow on a per unit basis and was funded with approximately:
- $114.4 million of cash borrowings under Rose Rock's revolving credit facility
- $120.0 million of equity from the issuance of 2.4 million common units to SemGroup
- $61.9 million of equity from the issuance of 1.25 million Class A units to SemGroup. The Class A units will not receive any distributions, but are convertible into common units on a one-for-one basis once White Cliffs Pipeline achieves an average monthly volume of 125,000 barrels per day.
SemGroup gains increased distributions from Rose Rock for the limited partner common units it received as consideration for the transaction. The increased distributions from Rose Rock will support SemGroup's dividend growth strategy.
SemGroup now owns approximately 57% of the limited partner common units and all of the 2% general partner interest of Rose Rock.
The terms of the acquisition were approved by the Conflicts Committee of the board of directors of Rose Rock's general partner. The Conflicts Committee engaged Evercore Partners to act as its independent financial advisor and to render a fairness opinion, and Akin Gump Strauss Hauer & Feld LLP to act as its legal advisor. LCT Capital LLC acted as financial advisor to SemGroup on the transaction.