NGL Energy teams with SemStream to expand midstream business

Source: NGL Energy

NGL Energy Partners LP (NYSE:NGL) has signed an agreement with SemStream L.P., a subsidiary of SemGroup Corporation (NYSE:SEMG), whereby SemStream will contribute substantially all of its natural gas liquids business and assets to NGL for common units and cash. In addition, SemStream will acquire an interest in the general partner of NGL. SemStream will have the right to appoint two members to the board of directors of the general partner. 

Stephen Tuttle, President of the Midstream Division, stated, “This transaction will increase the number of terminals owned by the Partnership from three to fifteen, significantly expanding our midstream segment from the Mid-Continent to the West Coast, including Washington and Arizona. These assets generate fee-based revenues and complement our current wholesale supply and marketing business. In addition, we welcome all of the current SemStream employees to the NGL family and believe the combined teams will provide one of the strongest platforms for delivering NGLs in today’s marketplace.” 

At closing, NGL will issue approximately 8,950,000 common units to SemStream for the assets. In addition, up to a maximum of $100 million in cash will be paid in connection with working capital acquired. The cash working capital payment will be financed from borrowings under NGL’s amended revolving credit facility. The transaction is subject to clearance under the Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions and is expected to close in the fourth quarter of 2011. NGL expects this transaction to be accretive to its unitholders. 

Brian Pauling, Chief Operating Officer of the Midstream Division, said, “These assets and operations will provide balance between our business segments and continue the geographic expansion of our operation. This will position NGL to take advantage of opportunities arising from the expanding liquids rich shale plays throughout North America.” 

The assets include 12 natural gas liquids terminals, located in Arizona, Arkansas, Indiana, Minnesota, Missouri, Montana, Washington and Wisconsin, with over 12 million gallons of above ground propane storage, approximately 3.7 million barrels of underground leased storage for natural gas liquids, and a rail fleet of approximately 350 leased and 12 owned cars.

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