Energy Transfer Acquires Crestwood
Energy Transfer announced that it will acquire Crestwood Equity Partners in an all-equity transaction valued at approximately $7.1 billion, including the assumption of $3.3 billion of debt, based on the closing price on August 15, 2023.
Crestwood Services, the supply and logistics unit of Crestwood Equity Partners, opened a rail terminal in Montgomery, N.Y., in 2017, providing propane to marketers across New York, New England, and other parts of the Northeast. (See Fuel Oil News, October 2017.)
Under the terms of the agreement, Crestwood common unitholders will receive 2.07 Energy Transfer common units for each Crestwood common unit. The transaction is expected to close in the fourth quarter of 2023, subject to the approval of Crestwood’s unitholders, regulatory approvals, and other customary closing conditions. Upon closing, Crestwood common unitholders are expected to own approximately 6.5% of Energy Transfer’s outstanding common units.
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. If consummated, this 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.
This transaction is also expected to provide benefits to Energy Transfer’s NGL & Refined Products and Crude Oil businesses with the addition of strategically located storage and terminal assets, including approximately 10 million barrels of storage capacity, as well as trucking and rail terminals. These systems are anchored by predominantly investment-grade producer customers with firm, long-term contracts, and significant acreage dedications.
The transaction is expected to be immediately accretive to distributable cash flow per unit as well as neutral to Energy Transfer’s leverage metrics upon closing. Similar to Energy Transfer, Crestwood’s cash flows are supported by primarily fee-based revenues from long-term contracts with investment-grade counterparties. In addition, with the increased scale and strengthened balance sheet, Energy Transfer expects to be able to improve on the current cost of financing for the acquired debt securities. Structured as a 100% unit-for-unit exchange, the transaction is tax-efficient to Crestwood unitholders and is anticipated to position both partnerships for long-term value upside through the combination.
Energy Transfer also expects to achieve at least $40 million of annual run-rate cost synergies before additional benefits of financial and commercial opportunities.
Energy Transfer said its business model, strong balance sheet and backlog of growth opportunities supports the potential for significant additional value creation over time. The tax-efficient transaction is expected to provide Crestwood unitholders a benefit to distributions per unit and an opportunity to participate in Energy Transfer’s targeted annual distribution per unit growth rate of 3-5%.
BofA Securities acted as sole financial advisor to Energy Transfer and Kirkland & Ellis LLP acted as legal counsel. Intrepid Partners, LLC and Evercore acted as financial advisors to Crestwood and Vinson & Elkins LLP acted as legal counsel.
Slide presentations with additional information are accessible via the Energy Transfer and Crestwood websites at www.energytransfer.com and www.crestwoodlp.com.
Energy Transfer LP owns and operates diversified portfolios of energy assets in the United States, with nearly 125,000 miles of pipeline and associated energy infrastructure. Energy Transfer’s network spans 41 states with assets in all of the major U.S. production basins. Energy Transfer is a publicly traded limited partnership with core operations that include complementary natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, natural gas liquids and refined product transportation and terminalling assets; and NGL fractionation. Energy Transfer also owns Lake Charles LNG Company, as well as the general partner interests, the incentive distribution rights and approximately 34% of the outstanding common units of Sunoco LP (NYSE: SUN), and the general partner interests and approximately 47% of the outstanding common units of USA Compression Partners, LP (NYSE: USAC). For more information, visit the Energy Transfer LP website at www.energytransfer.com.
Houston, Texas, based Crestwood Equity Partners LP is a master limited partnership that owns and operates midstream businesses in multiple shale resource plays across the United States. Crestwood is engaged in the gathering, processing, treating, compression and transportation of natural gas; storage, transportation, terminalling, and marketing of NGLs; gathering, storage, terminalling and marketing of crude oil; and gathering and disposal of produced water. For more information, visit Crestwood Equity Partners LP at www.crestwoodlp.com; and to learn more about Crestwood’s sustainability efforts, visit https://esg.crestwoodlp.com.
Note: This news item is based on a press release dated Aug. 16, 2023, and on reporting by Fuel Oil News. Fuel Oil News photo by Stephen Bennett.