... Energy Transfer, Regency Energy to Merge in $18 Billion Deal

Energy Transfer Partners, Regency Energy to Merge in $18 Billion Deal

In what has been forecast to be a growing trend this year in the oil and gas sector, two energy firms have announced a merger worth about $18 billion. Energy Transfer Partners LP and Regency Energy Partners LP announced Jan. 26 the companies have entered into a definitive merger agreement.

This merger will be a unit-for-unit transaction, plus a one-time cash payment to Regency unit holders, that collectively implies a value for Regency of approximately $18 billion, including the assumption of net debt and other liabilities of $6.8 billion. The transaction is expected to close in the second quarter of 2015.

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After the merger, Energy Transfer Partners will be the second largest MLP and will be well diversified both geographically, with operations in substantially all major producing areas in the United States, and across business lines, with assets across the energy midstream value chain.

This merger is expected to create substantial cost savings, capital efficiencies and valuable ancillary benefits, as well as strengthen the overall growth platform for the combined company.

Energy Transfer Partners and Regency expect to capitalize on the full breadth of the combined gathering and processing platforms in several prolific producing regions, including the Permian Basin and Eagle Ford shale. Among the numerous benefits of this merger is the likelihood of further liquids volume growth for Lone Star, which is a natural gas liquids (NGL) joint venture between the companies, and also the expected increase in natural gas volumes into Energy Transfer Partners’s intrastate pipeline system.

The merger broadens the combined companies’ midstream footprint in Texas, as well as the Marcellus and Utica shale plays in Appalachia, where Regency’s operations and growth projects complement Energy Transfer Partners’s Rover interstate gas pipeline (currently under construction), which will create over 3 billion cubic feet per day (Bcf/day) of natural gas takeaway capacity.

The presence of Energy Transfer Partners and Regency in these shale plays will also be complemented by the significant activity of Sunoco Logistics Partners LP, another member of the Energy Transfer Partners family, as it builds on its asset base in that area.

Overall, Energy Transfer Partners intends to become a major player in the Marcellus and Utica shales and believes that the merger ideally positions the company to achieve that goal in the near term.

“I am very proud of the entire team at Regency and am honored to have been able to lead some of the finest people in the industry,” said Regency CEO Mike Bradley. “Together, we have built Regency into one of the largest gathering and processing MLPs in the U.S. over the last several years. In light of the current volatility in commodity prices and the changes in the capital markets, it became apparent over the last several months that Regency needed more scale and diversification, along with an investment grade balance sheet, to continue its growth. As a result, the combination with [Energy Transfer Partners] became a logical transaction, as we believe that this merger will create significant immediate and long-term value for our unitholders. The merger will also allow Regency and [Energy Transfer Partners] to consolidate our complementary midstream operations in the Permian and West Texas areas. The ability to bring those operations together under one roof is expected to create tremendous value for the unitholders of the combined partnerships.”

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