Energy Transfer Equity LP (NYSE:ETP) announced it has entered into a definitive agreement to acquire certain interests in PennTex Midstream Partners, LP (NASDAQ:PTXP) from various parties (“Sellers”) for total consideration of approximately $640 million. Upon closing the transaction, ETP will own 100% of the general partner of PTXP, together with all of its incentive distribution rights (IDRs), as well as 6.3 million common units and all 20 million subordinated units of PTXP, representing approximately 65 percent of the total limited partner interests in PTXP.
The acquisition consideration paid by ETP will be 50 percent ETP common units issued directly to Sellers and 50 percent cash. The cash portion of the purchase price will be funded with a combination of proceeds from common units recently issued under ETP’s At-The-Market program and borrowings under its revolving credit facility. Additionally, in conjunction with the transaction, Energy Transfer Equity has agreed to an IDR waiver in the amount of $33 million annually that will run in perpetuity.
PTXP owns midstream assets strategically located in the Terryville Complex in northern Louisiana that consist of a rich natural gas gathering system, two cryogenic natural gas processing plants totaling 400 million cubic feet per day of capacity, along with residue gas and natural gas liquids (NGLs) pipelines. These assets complement ETP’s existing midstream footprint in the region and position ETP for significant growth and value creation.
PTXP’s primary customer is Range Resources Corporation. In addition to long-term fee-based gathering and processing agreements that include minimum volume commitments, PTXP and RRC are parties to an agreement, which provides PTXP the exclusive right to build all of the midstream infrastructure for RRC within an area of mutual interest (AMI) in northern Louisiana and to provide midstream services to support RRC’s current and future production on substantially all of its operated acreage within the AMI.
The transaction is expected to close in the fourth quarter of 2016, subject to customary closing conditions.
Credit Suisse acted as the financial advisor to ETP for the transaction. Andrews Kurth Kenyon LLP served as legal counsel to ETP. (Original Source)
Shares of Energy Transfer closed yesterday at $16.48, down $0.01 or -0.06%. ETE has a 1-year high of $22.25 and a 1-year low of $4.00. The stock’s 50-day moving average is $16.70 and its 200-day moving average is $14.68.
On the ratings front, ETE has been the subject of a number of recent research reports. In a report issued on October 13, Jefferies analyst Christopher Sighinolfi reiterated a Buy rating on ETE, with a price target of $20, which represents a potential upside of 21% from where the stock is currently trading. Separately, on October 7, Wolfe Research’s Steve Fleishman initiated coverage with a Hold rating on the stock and has a price target of $17.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Christopher Sighinolfi and Steve Fleishman have a total average return of 9.9% and -3.3% respectively. Sighinolfi has a success rate of 65% and is ranked #256 out of 4190 analysts, while Fleishman has a success rate of 42% and is ranked #3171.
The street is mostly Bullish on ETE stock. Out of 9 analysts who cover the stock, 7 suggest a Buy rating and 2 recommend to Hold the stock. The 12-month average price target assigned to the stock is $20.50, which implies an upside of 24% from current levels.
Energy Transfer Equity LP provides natural gas pipeline transportation and transmission services. The company operates its business in seven segments: Interstate Transportation and Storage, Midstream, NGL Transportation and Services, Retail Marketing, Investment in Sunoco Logistics, Investment in Regency and Corporate and Other. The Intrastate Transportation and Storage segment includes natural gas transportation pipelines receive natural gas from other mainline transportation pipelines and gathering systems and deliver the natural gas to industrial end-users, utilities and other pipelines. The Midstream segment consists of natural gas gathering, compression, treating, processing and transportation, and is generally characterized by regional competition based on the proximity of gathering systems and processing plants to natural gas producing wells. The NGL Transportation and Services segment engages in processing and fractionating refinery off-gas. The Retail Marketing segment consists of Sunoco, Inc., marketing operations, which sell gasoline and middle distillates at retail and operates convenience stores in 25 states, primarily on the east coast and in the Midwest region of the U.S.