Category Archives: Midstream

Phillips 66 to takeover Phillips 66 Partners

Phillips 66 has agreed to buy its publicly-traded MLP partnership, Phillips 66 Partners for $3.4 billion in an all-stock deal. This continues the recent trend of MLP’s being brought back in-house.

The partnership was originally spun off in July 2013. At the end of last year, Phillips 66 owned 74% of the common units of the partnership, and controlled the general partnership that managed the MLP. 98% of the revenues of the MLP were generated from Phillips 66.

Phillips 66 signaled back in February that it was considering a takeover of the MLP.



Companies spinning off their midstream assets into a separate master limited partnership was all the rage about 10-15 years ago. It was sold to retail investors as a high-yield, low risk play. Unfortunately that proved not to be the case, as many entered the energy downturn in late 2014 too highly leveraged. That led to distribution cuts and the sector fell out of favor. (The Phillips MLP has not cut its dividend since it has been a public company).

In addition, in some cases, the retail unitholders suffered at the hands of the controlling general partner.  The tax reform legislation passed in 2017 also reduced the tax benefits that MLPs receive.

The transaction is expected to close in the first quarter of 2022.

Phillips 66 MLP acquisition – press release

 

 

Houston midstream company to be acquired for $1.8 billion

Crestwood Equity Partners has agreed to buy fellow Houston company, Oasis Midstream Partners, for $1.8 billion. $160 million will be paid in cash, the rest in stock. Oasis will own about 22% of Crestwood after the deal goes through.



Oasis Midstream was spun out of Oasis Petroleum in September 2017. Its assets are primarily midstream assets in the Williston Basin in North Dakota. There are also a few assets in the Delaware Basin. In 2020, it had revenues of $347 million. Of that, 97% were generated by Oasis Petroleum.

Oasis Petroleum has a 67.5% limited partner interest in Oasis Midstream. The parent entered a pre-packaged bankruptcy in late 2020. After exit, its founder and CEO retired, and it sold its Permian Basin assets for $481 million to become a pure-play Bakken E&P operator.

Crestwood already has 796 miles of pipeline in the Bakken and 311 miles in the Delaware Basin, plus related infrastructure. It also has assets in the Marcellus, Barnett and Powder River Basins.

Crestwood expects to generate $25 million in cost savings from operations and general and administrative expenses.

The deal is expected to close in the first quarter of 2022.

https://www.sec.gov/Archives/edgar/data/0001136352/000119312521307205/d243796dex993.htm

Altus Midstream to be taken over in all-stock transaction

Altus Midstream, based in Houston, has agreed to taken over by privately-held EagleClaw Midstream. The deal is an all-stock transaction that values the combined business at $9 billion enterprise value.



Prior to the transaction, Altus was 79% owned by Apache (now called APA Corp). After the transaction is completed in Q1 2022, the current majority shareholders of EagleClaw, Blackstone and I Squared Capital, will own 75%. Apache will own 20%, and existing Altus public shareholders will own about 5%.

Altus owns gas gathering and processing assets in the Delaware Basin to service Apache’s production in Alpine High. It also has equity interests in four Permian-to-Gulf Coast pipelines. EagleClaw owns gas gathering and processing assets in the Delaware Basin.

Altus was spun off from Apache in November 2018 when it went public after being acquired by a SPAC or blank check company. At that time, it had a market capitalization of $3.5 billion. Currently, it has a market cap of $1.4 billion. That’s after the recent run-up in the stock price from $65 in late September to $86.53 right before the deal was announced.

The poor share performance since Altus went public is a result of the disappointing results of the Alpine High project of Apache. It was announced with great fanfare in 2016. The field turned out to have more gas than oil. In 2020, Apache wrote off $1.4 billion and Altus $1.3 billion from the assets values related to the project. Ironically, the recent rise in gas prices should lift prospects for Alpine High.

The combined business will have its head office in Midland where EagleClaw is based. The senior management of EagleClaw are based in Houston and will run the combined business, which will operate under a new, yet-to-be-determined name.

SEC filing – Altus Midstream merger

 

 

 

Chevron proposes to buy out Noble Midstream Partners

Four months after Chevron acquired Noble Energy, it has submitted a non-binding proposal to acquire all the publicly-held common units of Noble Midstream Partners LP (‘NBLX’).



Chevron already owns 62.5% of NBLX, through its acquisition of Noble Energy. It is also the biggest customer of NBLX, with about 60% of revenues generated from Chevron. So the deal is going through, it’s just a question at what price.

Chevron’s proposal was $12.47 per common unit, which meant no premium to the closing price on February 4. NBLX’s price ended up at $13.30 the following day, suggesting the market expects Chevron to sweeten the pot.  A year ago, the units were trading at $22 per unit.

This continues the trend of publicly-traded MLP’s being reabsorbed into their former parent companies. Other Houston-area examples in recent years are;

 

SEC filing – Chevron – Noble Midstream proposal

Publicly-traded MLP to be acquired by effective parent

[UPDATE March 2, 2021 – Deal has now been completed and TC Pipelines has been delisted].

Houston-based TC Pipelines, LP is to be acquired by TC Energy which controls the General Partner that manages TCP. TC Energy also owns 24% of the common units of master limited partnership.



This is part of a trend in recent years where MLPs have been taken back in-house. Once owners and investors realized that MLPs were not really like a risk-free utility, the cost of capital rose and the attractions of being publicly-traded faded.

The deal values TCP at $1.68 billion or $31 per common unit. The 52-week high was $41. Once again, minority unit holders will feel aggrieved that the controlling owner has chosen to act when the stock price has been depressed. However, the offer price does represent a rise from the $27.31 that TC Energy originally proposed back in October.

TCP was formed by TransCanada in 1998 and went public the following year in a $275 million Initial Public Offering.  The company has interests in 6,300 miles of natural gas pipelines, mainly in the Great Lakes region and the Pacific Northwest.

The deal is expected to close around the end of the first quarter of 2021.

https://www.tcpipelineslp.com/announcements/2020-12-15-tc-pipelines-lp-announces-definitive-agreement-for-tc-energy-to-acquire-all-its-outstanding-common-units/

CFO of publicly-traded midstream company departs

Michael Pearl, the CFO of Western Midstream Partners, will be leaving the company, although the company didn’t say when! Michael Ure, the current CEO, is taking over the CFO duties until a successor is identified.



Western Midstream is a master limited partnership that went public in 2008 as a subsidiary of Anadarko. It’s now owned by Occidental, following its takeover of Anadarko last year. It has its head office in The Woodlands.

Mr Pearl joined Anadarko in 2004. He was the CFO of the general partner of Western Midstream for two years straddling the IPO.  After that, he held senior financial roles in Anadarko until he became the CFO of Western Midstream in October 2019. His base salary was $455,000.

In August 2019, ahead of his proposed appointment, Mr Pearl entered into a retention agreement that provided for three cash payments of $261,000 each, to be paid in February 2020, August 2020 and February 2021. If he was terminated without cause, the unpaid amounts would vest. In signing the retention agreement, Mr Pearl waived his right to additional severance payments.

SEC filing – Pearl departure

 

Houston MLP delisted after $6.5 billion takeover

Buckeye Partners has been delisted after its takeover by IFM Global Infrastructure Fund was completed. The $6.5 billion deal was originally announced in May 2019.



The original Buckeye Pipe Line Company was founded in 1886 as part of Standard Oil and became a publicly-owned independent company in 1911 after Standard Oil was broken up. In 1964, the company was acquired by a subsidiary of the Pennsylvania Railroad. In 1986, it was reorganized into a master limited partnership (MLP) and went public the same year.

Buckeye has 6,000 miles of pipeline and 115 liquid petroleum products terminals in the US and the Caribbean. In 2018, it had revenues of $4.1 billion. The company has its head office in Greenway Plaza.

Breakup of Standard Oil

Standard Oil was established by John D Rockefeller and Henry Flagler in 1870. In 1911 the Supreme Court ordered it to be broken up into 34 smaller companies. This included;

  • Standard Oil of New Jersey – later merged with Humble Oil to become Exxon
  • Standard Oil of New York – later merged with Vacuum to become Mobil
  • Standard Oil of California – renamed as Chevron.
  • The Ohio Oil Company – renamed as Marathon.

Background to the deal

In early 2018, the Board of the partnership decided to pursue strategic alternatives given that publicly-traded MLPs were out-of-fashion with investors. The company had discussions with various interested parties through May 2019.

IMF agreed to pay $41.50 per unit, all in cash. That represented a premium of 27.5% over the closing price of the partnership units prior to the announcement.

Equity awards vest

Equity options have vested on completion of the transaction and will be settled in cash. That means that CEO Clark Smith will receive $16.9 million and CFO Keith St. Clair $5.6 million. 7 other members of the executive management team will receive between $2.2 million and $4.8 million each.

If senior executives are also terminated as a result of the merger, they will also receive severance (annual salary plus target annual cash bonus). For CEO Smith that would be $2 million, for St. Clair that would be $1.2 million. The deal closed Friday without any terminations in the senior management group.

You can see the updated list of Houston-area public companies here

SEC filing – Buckeye takeover

Midstream MLP appoints new CFO

Michael Pearl has been appointed as the new CFO of the general partner of Western Midstream Partners.

Occidental fully owns the general partner stake and around 55% of the limited partner units. The company gained ownership following its takeover of Anadarko earlier this year. Western Midstream has a market cap of $10.3 billion and has its head office in The Woodlands.



Mr Pearl joined Anadarko in 2004 and served in various leadership positions such as Director of Tax, Treasurer, Corporate Controller and Senior VP of Investor Relations. He started his career at Ernst & Young.

Mr Pearl replaces Jaime Casas who has been appointed the VP and Treasurer of Occidental.

The company also announced the appointment of Catherine Green as the Chief Accounting Officer of the general partner of Western Midstream. She joined Anadarko in 2001 and started her career with Grant Thornton in the United Kingdom and Houston.

After its takeover of Anadarko, Occidental planned to sell Western Midstream to reduce debt. Or least sell enough of a stake so that it didn’t have to consolidate the $7.5 billion debt that Western Midstream carries.

Earlier this month, according to Reuters, Occidental shelved plans to sell Western Midstream because Western’s market value has dropped by 18% since July 30 and Occidental doesn’t want to sell at too low a price.

You can see the complete list of Houston-area publicly-traded companies here.

SEC filing – Western Midstream CFO

 

 

For sale midstream company appoints new CFO

Noble Midstream Partners has appointed Thomas Christensen as the CFO of the General Partner. He was appointed interim CFO in July 2019 and has been the Chief Accounting Officer since August 2016.



Noble Midstream has a market cap of $960 million and is based in NW Houston. It was spun off from its parent company, Noble Energy, in September 2016.  That was when MLP partnerships going public was in vogue.

Noble Midstream Partners still gets 57% of its total revenues from Noble Energy, who still own a 45% partnership interest in them.

According to a report in Bloomberg in early August, The Williams Companies, based in Tulsa, and New York PE firm, Global Infrastructure Partners, are working on a possible offer for the company.

The previous CFO, John Bookout resigned to pursue another opportunity in July. He was followed out the door by CEO, Terry Gerhart, and COO, John Nicholson, the following month. They resigned on August 9 to ‘pursue other business opportunities’. Brent Smolik, currently the COO of Noble Energy, was appointed CEO of the General Partner.

SEC filing – Noble appointment of CFO

CFO reappointed as reverse takeover is completed

Stabilis Energy has completed its reverse takeover of American Electric Technologies (AETI) that was originally announced in January 2019. Andy Puhala, the CFO of Stabilis, becomes the CFO of the combined group. He was formerly the CFO of AETI between January 2013 and September 2015.



AETI, a provider of power delivery systems to the Energy sector, is based in Bellaire. It sold off its main US business in August 2018, leaving it with just an operation in Brazil and a joint venture in China. Stabilis has acquired the business for $10.2 million

Stabilis Energy is a small-scale producer and distributor of Liquefied Natural Gas (LNG). Small scale facilities typically produce 50,000 to 500,000 gallons a day. The product is usually used within 500 miles of the production facility in locations not near a natural gas pipeline. Stabilis has one facility located between San Antonio and Corpus Christi that produces 120,000 gallons a day.

The company has its head office in west Houston. For the year ended December 2018, the proforma business had revenues of $45 million.

Stabilis is owned by Casey Crenshaw, who has also been a director and shareholder of AETI since 2012. The share exchange agreement will leave the former owners of Stabilis owning 89% of the combined company. Existing AETI shareholders will own the remaining 11%.

Immediately after the transaction was completed, the company received a delisting notice from Nasdaq because it neither has a minimum of 1 million publicly-held shares nor a minimum market value of $15 million for the publicly-held shares. That’s due to Casey Crenshaw owning 88% of the combined company. The company plans a hearing with Nasdaq

The company will now be known as Stabilis Energy Inc and will trade under the ticker symbol ‘SLNG’.