- 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.
