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Energy Transfer Secures $7.1 Billion Deal to Take Over Crestwood
08/30/2023![Energy-Transfer-Secures-7-1-Billion-Deal-to-Take-Over-Crestwood](https://images2.rextag.com/public/blog/176Blog_Crestwood's assets to be acquired in Williston, Delaware, and Powder River basins.png)
- Energy Transfer to buy Crestwood for $7.1B.
- Deal includes taking on $3.3B of Crestwood's debt.
- Adds significant gas and crude gathering capacity to Energy Transfer.
Energy Transfer is taking on $3 billion of Crestwood's debt in a stock deal. This move expands their reach in the Williston and Delaware basins and gets them into the Powder River Basin for the first time.
Drilling down into Energy Transfer's latest acquisition
Energy Transfer LP announces plans to buy Crestwood Equity Partners LP in a stock-based transaction worth $7.1 billion, marking another major deal in the midstream industry this year.
Crestwood's portfolio features gathering and processing facilities in the Williston, Delaware, and Powder River basins. The assets include roughly 2 billion cubic feet per day in gas gathering, 1.4 billion cubic feet per day in gas processing, and 340,000 barrels per day in 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,” Energy Transfer said.
Energy companies are increasingly investing in pipeline ventures as a strategy to counterbalance the shrinking revenues from their fossil fuel operations. For example, Phillips 66 announced a $3.8 billion investment to double its ownership in a Denver-based pipeline company earlier this year, aiming to increase sales of natural gas liquids like ethane, propane, and butane. This move came on the heels of Targa Resources' $1.05 billion acquisition of the extensive Grand Prix NGL Pipeline system, which also transports natural gas liquids.
Financial impact
The acquired assets from Crestwood are anticipated to synergize well with Energy Transfer's downstream fractionation facilities at Mont Belvieu. They are also expected to bolster the company's hydrocarbon export operations at its Nederland Terminal in Texas and Marcus Hook Terminal in Philadelphia.
Energy Transfer projects a yearly cost savings of $40 million from the deal, not accounting for other financial and commercial advantages. Crestwood unitholders are set to gain both in distributions per unit and the chance to be part of Energy Transfer's aimed annual distribution growth of 3% to 5%.
Energy Transfer is taking on Crestwood's $3.3 billion debt in the deal but describes it as "credit neutral." According to the terms, Crestwood unit holders will get 2.07 Energy Transfer units for each of their Crestwood units. The acquisition is slated to wrap up in the fourth quarter of 2023, pending approval from Crestwood unit holders, regulatory green lights, and other standard closing conditions.
Energy Transfer boasts one of the most extensive and varied collections of energy assets in the U.S., with close to 125,000 miles of pipelines and other related infrastructure. Crestwood, a Houston-based master limited partnership, also specializes in midstream operations and has a presence in various shale resource areas across the country.
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From Beginnings to a $7.1 Billion Milestone: Deal-Making Histories of Energy Transfer and Crestwood - Complex Review by Rextag
Energy Transfer's unit prices have surged over 13% this year, bolstered by two significant acquisitions. The company spent nearly $1.5 billion on acquiring Lotus Midstream, a deal that will instantly boost its free and distributable cash flow. A recently inked $7.1 billion deal to acquire Crestwood Equity Partners is also set to immediately enhance the company's distributable cash flow per unit. Energy Transfer aims to unlock commercial opportunities and refinance Crestwood's debt, amplifying the deal's value proposition. These strategic acquisitions provide the company additional avenues for expanding its distribution, which already offers a strong yield of 9.2%. Energized by both organic growth and its midstream consolidation efforts, Energy Transfer aims to uplift its payout by 3% to 5% annually.
Kimbell Set to Purchase Permian and Mid-Continent Assets for $455 Million
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/R 170_Blog_Kimbell Set to Purchase Permian and Mid-Continent Assets for $455 Million.png)
Kimbell Royalty Partners' acquisition adds land in Delaware & Midland basins, enhancing its lead in production, active rigs, DUCs, permits & undrilled inventory. Kimbell Royalty Partners LP has recently announced a landmark deal, the largest in its history, to expand its foothold in the oil and gas industry. The company has agreed to purchase Permian Basin and Midcontinent assets for a staggering $455 million in cash from a private seller.
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/297_Blog_Keystone XL Pipeline Controversy and Wildlife Disaster From Trump's Green Light to Biden's Red Light on the 15 Billion Project.jpg)
The pipeline industry in the USA faced and still faces a range of regulatory challenges, including permitting delays, environmental requirements, and public opposition to pipeline projects. In recent years, pipeline projects like the Keystone XL and Dakota Access pipelines had legal and regulatory obstacles that delayed or canceled their construction. Keystone XL Pipeline, proposed by TransCanada in 2008, aimed to transport crude oil from Canada (around Calgary and Edmonton) to refineries on the Gulf Coast (Port Arthur). The project faced opposition from environmental groups and indigenous communities, who argued that it would contribute to climate change and pose a risk to water resources. In 2015, President Obama rejected the project, citing concerns about its environmental impact. However, in 2017, President Trump revived the project, leading to further legal challenges. In June 2021, U.S. President Joe Biden officially canceled the project on his first day in office.
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/282_Blog_Renewable Natural Gas How RNG Changes the Industry.jpg)
The renewable natural gas (RNG) industry in the United States is showing promising signs of growth. As of 2019, the U.S. consumed 261 billion cubic feet (BCF) of RNG, primarily utilized by independent power producers, electric utilities, and various commercial and industrial entities. However, this figure represents only a small fraction of its potential. Research indicates that the U.S. could theoretically produce up to 2,200 BCF of RNG through anaerobic digestion alone, which would equate to about 11% of daily national natural gas consumption.
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Recently, the progress toward an energy transition is hitting a snag. Sales of electric vehicles are decelerating, and the growth in wind and solar power needs to be keeping pace with expectations. To make matters more challenging, electricity prices are climbing when they were expected to fall. Amidst these setbacks, the oil and gas sectors are proving resilient. According to BP's latest energy outlook, not only are these energy mainstays here to stay, but their demand is expected to remain relatively high even after reaching a peak. Interestingly, BP forecasts that oil demand will reach its zenith next year, marking a critical moment in energy consumption trends. This isn't the first time BP has projected a peak in oil demand. Back in 2019, their review anticipated a decline in demand growth, but the prediction fell flat. Instead, oil demand surged to unprecedented levels following the end of the global pandemic lockdowns, defying previous forecasts and underscoring the enduring dominance of traditional energy sources in the global market.