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Pipeline Company Giant Energy Transfer LP to Acquire Crestwood Equity Partners

On August 16th, it was officially announced that Energy Transfer will undertake a $7.1 billion all-equity acquisition of Crestwood Equity Partners' valuable energy infrastructure spread across multiple US river basins. The transaction includes assuming $3.3 billion of debt and paying 2.07 common units from Energy Transfer for each Crestwood unit. This deal values Crestwood at approximately $26 per unit, in line with Tuesday's closing price of $26.19. Following the news, both companies experienced marginal stock price increases.

Anticipated to conclude in the fourth quarter, this acquisition strategically positions Energy Transfer to fortify its presence in key energy-rich regions within the continental US, enabling future growth and diversification. Crestwood's significant gas and crude oil gathering capacities substantially enhance Energy Transfer's operational capabilities. Amid heightened deal activity in the US energy sector, this move aligns with robust profits and the optimization of existing infrastructure. CEO Kelcy Warren's ongoing acquisitions, exceeding $11 billion, reflect a proactive strategy to acquire pipelines and associated assets in the Permian region, including the central Williston, Delaware, and Powder River basins.

In numbers, the deal entails 2 billion cubic feet per day of gas-gathering capacity, 1.4 billion cubic feet per day of processing capacity, and 340,000 barrels per day of crude-gathering capacity, substantially expanding Energy Transfer's value chain reach. The company expects the transaction to immediately enhance distributable cash flow per unit and maintain a neutral impact on its leverage metrics upon closure. Both Energy Transfer and Crestwood benefit from primarily fee-based revenues through long-term contracts with investment-grade counter parties. The deal's structure, a 100% unit-for-unit exchange, offers tax efficiency to Crestwood unit holders and positions both entities for long-term value growth through the combination. Energy Transfer aims to achieve $40 million in annual cost synergies, along with financial and commercial opportunities.

Furthermore, the combination of Crestwood's Storage and Logistics business with Energy Transfer's NGL and Refined Products and Crude Oil assets, encompassing 10 million barrels of storage capacity, trucking, and rail terminals, presents substantial commercial synergy prospects. Anchored by investment-grade producer customers with firm, long-term contracts, and significant acreage dedication, these systems enhance Crestwood unit holders' distributions and provide long-term value appreciation potential, further enhancing the appeal of the deal.

Bank of America Securities provided financial advisory services to Energy Transfer and Crestwood received financial advisory support from Intrepid Partners LLC and Evercore.

In conclusion, Energy Transfer's $7.1 billion acquisition of Crestwood Equity Partners' energy infrastructure bolsters its market presence and operational capabilities, aligning with its strategic growth objectives while capitalizing on synergies within the energy sector.

Written by: Ignacio Paz, Energy Team

Sources: Morningstar, EnergyTranser, Bloomberg, Financial Times, Renewables Now

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