SemGroup Completes Contribution of SemStream Assets to NGL Energy Partners

abarrelfullabarrelfull wrote on 03 Nov 2011 15:34
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SemGroup® Corporation (NYSE: SEMG) today announced that it has completed its contribution of the company's SemStream®, L.P. business into NGL Energy Partners LP (NYSE: NGL) in exchange for cash and equity interests. This transaction is intended to enhance SemGroup's investment in natural gas liquids, create additional opportunities for growth and strengthen SemGroup's financial profile through increased earnings.

As previously announced, all assets of SemStream, L.P. were incorporated in this contribution excluding those of SemStream Arizona Propane, L.L.C. In exchange for these assets, SemGroup Corporation received the following:

8.93 million common units of NGL Energy Partners stock, representing an approximately one third equity interest in the limited partnership:
7.5 percent equity interest in the General Partner of NGL Energy Partners;
A cash payment of up to $100,000,000 for working capital, subject to adjustment; and
Two seats on the board of directors of the general partner of NGL Energy Partners.
"We are pleased to report on the closing of this transaction which we believe demonstrates the benefits that the NGL MLP structure can deliver for our shareholders," said Norman Szydlowski, SemGroup President and Chief Executive Officer. "By contributing our SemStream assets to NGL, we are confident that we will improve the stability of SemGroup's cash flows, reduce earnings volatility, increase earnings and create an additional platform for growth."

Mr. Szydlowski continued, "Our future cash flows will be derived from the quarterly distributions we receive from NGL Energy Partners. In essence, this transaction converts a seasonal cash flow into a stable distribution leveraged towards growth. As part of the transaction, we will also own 7.5% of the General Partner and associated incentive distribution rights, which means we will receive increasing percentages of cash distributed from operations as the partnership meets certain thresholds," added Mr. Szydlowski.

The completion of this transaction represents a significant milestone in SemGroup's long-term strategic plan, which also includes:

Near-term construction at Cushing, OK;
Increasing capacity at its gas processing facilities in northern Oklahoma to take advantage of active drilling in the Mississippian lime formation; and
Our previously announced plan to form our own Master Limited Partnership which is intended to provide a more tax-efficient entity that will be well positioned to create additional value for our stockholders through organic growth projects and acquisitions.
Mr. Szydlowski concluded, "We believe SemGroup has the right mix of assets and the financial strength to participate in growth opportunities in the oil and natural gas production markets. We remain enthusiastic about SemGroup's prospects and are confident that our strategic initiatives will create substantial value for stockholders."

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