Some publicly-traded U.S. energy pipeline and oil-storage partnerships are restructuring into simpler business models to help attract new investors and spur growth.
Rising oil and gas production has spawned billions of dollars of new transport, gathering and storage projects. But the companies most responsible for these projects can allocate up to 50 percent of their income to the general partner, leaving less for other holders or to invest in new projects.
Historically, these firms have passed most of their income along to holders and sold equity or debt to finance new projects or acquisitions. But in the last year, what they have had to offer investors has jumped. MPLX Energy Logistics LP, for instance, paid a 9.7 percent annualized distribution last quarter to its holders, up from 7.9 percent a year earlier, according to figures from investment firm East Daley Capital Advisors.
“The higher cash yield makes the economics of these projects a little tougher,” said Kendrick Rhea, an analyst at East Daley Capital. He estimates the cost of equity has risen nearly a third for some companies in the last year.
Source: NuStar, other energy partnerships simplify business models to spur growth
Two new crude pipeline projects from West Texas’ prolific Permian Basin to the Corpus Christi coastline have analysts crowing about refinery and export expansion in that city. The Houston-based pipeline company Buckeye Partners has proposed a 400,000 barrel-per-day line from Wink and Midland to existing facilities in Corpus.And a three-company consortium — TexStar Midstream Logistics, based in San Antonio, Castleton Commodities International, out of Connecticut, and Dallas-based Ironwood Midstream Energy — have proposed a new 590,000 barrel-per-day pipeline from Orla, Pecos, Crane, and Midland to Corpus, with a stop in Gardendale in the Eagle Ford oil field. Both projects aim to open for business in 2019.
Source: Pipelines planned from Permian to Gulf; Boom to come to Corpus Christi | Fuel Fix
One of Dallas’ largest public companies has claimed a major stake in a Houston-based midstream company.Dallas-based Energy Transfer Partners LP (NYSE: ETP) will buy the general partner of PennTex Midstream Partners LP (Nasdaq: PTXP), along with certain other interests, for about $640 million, the companies announced Oct. 25. The transaction is expected to close by the end of the year.
Source: Energy Transfer Partners to buy PennTex Midstream Partners’ general
Dakota Access pipeline parent co. to buy interest in Houston midstream co. for $640M
partner – Houston Business Journal
Enbridge Inc. announced Wednesday that hundreds of its employees have lost their jobs as the Calgary-based firm moves to cut 5 per cent of its work force.One month after the oil pipeline giant announced a $37-billion deal to buy Houston-based Spectra Energy Corp. to create North America’s largest energy infrastructure firm, an Enbridge spokeswoman said the company will reduce its work force by approximately 5 per cent across the organization.About 530 positions are affected – including 370 in Canada and 160 in the U.S.
Source: Enbridge to cut 370 jobs in Canada, 160 in the U.S. – The Globe and Mail
nbridge Inc. (TSX, NYSE: ENB) (Enbridge) and Spectra Energy Corp (NYSE: SE) (Spectra Energy) today announced that they have entered into a definitive merger agreement under which Enbridge and Spectra Energy will combine in a stock-for-stock merger transaction (the “Transaction”), which values Spectra Energy common stock at approximately C$37 billion (US$28 billion), based on the closing price of Enbridge’s common shares on September 2, 2016. The combination will create the largest energy infrastructure company in North America and one of the largest globally based on a pro-forma enterprise value of approximately C$165 billion (US$127 billion). The Transaction was unanimously approved by the Boards of Directors of both companies and is expected to close in the first quarter of 2017, subject to shareholder and certain regulatory approvals, and other customary conditions.
Source: Enbridge and Spectra Energy to Combine to Create North America’s Premier Energy Infrastructure
A subsidiary of EnLink Midstream Partners LP and EnLink Midstream LLC plans to construct a crude oil gathering system in Upton and Midland counties, Tex., in the Permian basin.The partnership will invest $70-80 million in the Greater Chickadee crude oil gathering project, which will include more than 150 miles of high- and low-pressure pipelines that will transport crude volumes to several major market outlets and other hub centers in the Midland area.The project also includes the construction of multiple central tank batteries and pump, truck injection, and storage stations to expand shipping and delivery options for EnLink’s producer customers. The initial phase of Greater Chickadee will be operational in this year’s second half with full service expected early next year.
Source: EnLink to build Midland basin crude gathering system – Oil & Gas Journal
Energy Transfer Equity LP (ETE.N) is taking steps that may enable it to renegotiate its acquisition of Williams Companies Inc (WMB.N), according to people familiar with the matter.Dallas billionaire Kelcy Warren, the chief executive of Energy Transfer, set his sights on Williams last year to transform his empire into one of the biggest pipeline networks in the world. However, a prolonged drop in oil and gas prices has made the deal less economically attractive.Energy Transfer and Williams are in talks to reduce the number of days specified for completing some of the deal’s administrative requirements, the people said.This would give them time to engage in renegotiation of terms ahead of a June 28 deadline for the deal to close, the people added.There is no certainty that such renegotiation talks will occur, let alone be successful, the people cautioned.
Source: Exclusive: Energy Transfer seeks to renegotiate deal with Williams – sources | Reuters
In late January, about 40 Wall Street financiers packed into a private dining room at III Forks Steakhouse in Houston for an update on the troubled multibillion-dollar merger of pipeline companies Energy Transfer Equity and the Williams Cos. With shares of Dallas-based Energy Transfer down 50 percent since the transaction was announced in September, the investors interrogated Energy Transfer’s chief financial officer, Jamie Welch. He tried to assuage analysts and investors, assuring them that his company was committed to closing the deal.Less than 10 days later, Energy Transfer fired Welch.Welch’s ouster stunned most investors, causing Energy Transfer’s stock to drop 42 percent in one day, but not everyone was surprised. Since December, Welch, a former investment banker who helped sculpt the $38 billion acquisition, had been actively trying to recut the deal or get out of it entirely.In recent months, Welch has called Williams shareholders, urging them to push the board to reconfigure the deal or vote against it, according to interviews with five shareholders who requested anonymity because they were not authorized to discuss the private conversations.Welch argued that the deal’s terms, a mix of stock and a sizable $6 billion cash payout to Williams shareholders, would crush the combined new company under a mountain of debt. In one call, a shareholder said, Welch referred to the cash payout as “mutually assured destruction.”
Source: Energy Transfer’s ex-CFO reportedly sought to undo Williams Cos. merger deal | | Dallas Morning News
The $500 billion midstream sector is bracing on Tuesday for a ruling from a U.S. bankruptcy judge that could determine if energy producers can use Chapter 11 to shed contracts with pipeline operators for transporting oil and natural gas.U.S. Bankruptcy Judge Shelley Chapman in Manhattan will read her ruling at 2:30 pm ET on a request by Houston-based Sabine Oil & Gas Corp to reject a contract with an affiliate of Cheniere Energy Inc to gather and process natural gas in Texas.Chapman’s ruling will be the first major test for using Chapter 11 to shed the contracts, which were seen as a way to protect the midstream industry from the volatility of energy prices.Underpinned by the stability offered by the capacity contracts, many midstream companies organized as high-yielding master limited partnerships favored by income-seeking investors.
Source: Midstream energy industry braces for key bankruptcy court ruling | Reuters
HOUSTON–(BUSINESS WIRE)–Jan. 29, 2015– Enterprise Products Partners L.P. (“Enterprise”) (NYSE:EPD) today announced its financial results for the three months and year ended December 31, 2014.
For the year ended 2014, Enterprise reported a record $5.3 billion in gross operating margin, a 9.7 percent increase over 2013. Distributable cash flow increased to $4.1 billion for 2014, an 8.8 percent increase compared to 2013. Distributions declared with respect to 2014 were $1.45 per unit, a 5.8 percent increase compared to 2013. Distributable cash flow for 2014 provided 1.5 times coverage of the distributions declared with respect to 2014 and enabled Enterprise to retain $1.4 billion of distributable cash flow to reinvest in the growth of the partnership.
“Enterprise reported another record year in 2014,” stated Michael A. Creel, chief executive officer of Enterprise’s general partner. “Our results were driven by volume growth in our fee-based businesses. Enterprise reported record volumes of 5.3 million barrels per day for its NGL, crude oil, refined products and petrochemical pipelines, 824 thousand barrels per day for its NGL fractionators and 4.8 billion cubic feet per day of fee-based natural gas processing volumes for 2014.”
“Our successes included the completion of $4.1 billion of organic growth projects that began commercial operations and contributed new sources of cash flow during 2014. These projects include our ATEX, Front Range and Seaway loop pipelines, as well as the first segment of our Aegis ethane pipeline. We also developed new projects that are currently under construction such as our ethane export terminal and South Eddy natural gas gathering and processing facilities,” said Creel.
“Another significant accomplishment was our $4.6 billion acquisition of general partner and limited partner interests inOiltanking Partners, L.P. This transaction extends and broadens Enterprise’s midstream services business by enhancing the partnership’s access to waterborne markets and increases its crude oil and petroleum products storage capacity. Our ownership in Oiltanking Partners provides new avenues for growth and secures marine terminal assets that are important to several of our businesses,” stated Creel.
“As we begin 2015, the energy sector is entering another commodity price cycle. We believe that Enterprise is well positioned to manage, adapt and prosper through this cycle. Our businesses are diversified and primarily fee-based. We enter 2015 with financial flexibility: $4.2 billion of liquidity; leverage consistent with our BBB+/Baa1 investment grade debt ratings; and healthy distribution coverage. We have over $6 billion of projects that will begin operations over the next two years and support continued distribution growth,” concluded Creel.