Stock Monitor: Energy Transfer Partners Post Earnings Reporting
LONDON, UK / ACCESSWIRE / January 18, 2018 / Active-Investors.com has just released a free research report on USA Compression Partners, L.P. (NYSE: USAC) ("USAC"). If you want access to this report all you need to do is sign up now by clicking the following link www.active-investors.com/registration-sg/?symbol=USAC as the Company's latest news hit the wire. On January 16, 2018, the Company announced that it has entered into an agreement with Energy Transfer Partners, L.P. (NYSE: ETP) ("ETP") and Energy Transfer Equity, L.P. ("ETE") to acquire ETP's subsidiaries, CDM Resource Management LLC and CDM Environmental & Technical Services LLC (together referred to as "CDM"). The deal is valued approximately $1.8 billion. Register today and get access to over 1000 Free Research Reports by joining our site below:
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Active-Investors.com is focused on giving you timely information and the inside line on companies that matter to you. This morning, USA Compression Partners and Energy Transfer Partners most recent news is on our radar and our team decided to put out a fantastic report on the company that is now available for free below:
www.active-investors.com/registration-sg/?symbol=USAC
www.active-investors.com/registration-sg/?symbol=ETP
Details of the transaction
As per the terms of the agreement, USAC will acquire CDM from ETP and ETE for approximately $1.8 billion. In return, USAC will pay ETP $1.225 billion in cash plus approximately 19.2 million USAC common units and approximately 6.4 million USAC Class B units. The Class B units are expected to be converted into USAC common units on a 1:1 basis and are not eligible for quarterly cash distributions for the first four quarters or one year after the closing of the transaction.
The agreement also provides that ETE will acquire 100% stake in USAC's general partner - USA Compression Partners GP, LLC (USAC GP) and acquire approximately 12.5 million USAC common units from USA Compression Holdings. ETE will pay USA Compression Holdings $250 million cash for these USAC common units. Once the transaction is completed, USA Compression Holdings will still own approximately 12.5 million USAC common units.
As part of the transaction, USAC GP's ownership will be restructured and convert its general partner interest in USAC into a non-economic general partner interest. Since ETE will own 100% of USAC GP, it has resulted in the cancellation of the incentive distribution rights (IDRs) on closing of the deal. To compensate USAC GP for the IDR cancellation and the effects of the restructuring, USAC has agreed to issue 8 million USAC common units to USAC GP.
The transaction is expected to close in H1 2018 and is subject to regulatory approvals and other closing conditions.
USAC has arranged for the financing of the deal for the $1.225 billion cash portion. It plans to pay ETP $500 million via perpetual preferred units in funds managed by EIG Global Energy Partners which pay dividends of 9.75% and are redeemable after 10 years. For the balance $725 million, USAC has arranged for debt financing from JPMorgan and Barclays.
Commenting on the acquisition of CDM, Eric Long, President and CEO of USAC, said, "USAC's acquisition of CDM is a logical combination of two leading compression service providers – each with nearly two decades of delivering exemplary levels of customer service. Operating in different areas of geographic focus with nominal overlap, CDM brings to USAC a complementary and standardized fleet of large horsepower, infrastructure-oriented equipment, a customer-focused operating philosophy and a strong employee base consistent with those of USAC's...This transaction gives USAC the geographic reach to compete in all the active producing regions."
Advantages of the acquisition
USAC expects the deal to be accretive to its earnings per share (EPS) in FY18. The deal is expected to strengthen USAC's balance sheet and distribution coverage levels. The deal is expected to realize at least $20 million in synergies on a run-rate basis. CDM's earnings before interest, tax, depreciation, and amortization (EBITDA) for FY18 is expected to be in the range of $160 million to $170 million excluding synergies.
CDM's natural gas compression business is expected to add to USAC's strengths by 1.6 million horsepower. This will double USAC's fleet to 3.4 million horsepower and allow it to focus on large horsepower installations. Nearly 70% of CDM's fleet has over 1,000 horsepower, an average age of approximately 7 years and has operating utilization rate of 87%.
CDM's full range of gas treating and emissions testing services are expected to complement USAC's station services offerings which provide turnkey gas handling solutions.
USAC will be able to expand its geographic footprint across active basins, including Eagle Ford Shale, Gulf Coast, Rockies, and Permian Basin.
USAC plans to reveal the impact of the transaction and provide guidance for the full year 2018 when it announces its Q4 2017 results.
ETP plans to utilize the funds realized from this transaction to pay off its debts and strengthen its balance sheet. ETP will continue to be invested in CDM's future via ETE's stake in USAC GP.
About USA Compression Partners, L.P.
Founded in 1998, Austin, Texas-based USAC is a growth-oriented Delaware limited partnership. It is one of the largest independent providers of compression services in the US in terms of total compression unit horsepower. USAC is focused on providing compression services to infrastructure applications primarily in high volume gathering systems, processing facilities and transportation applications. The Company's business started from Fayetteville shale and now covers the Barnett shale, eastern Texas and the Haynesville shale, the Eagle Ford shale as well as Marcellus shale. Its operations have also expanded to the Permian and Delaware Basins and the Utica shale and in western Oklahoma and the Texas panhandle.
About Energy Transfer Equity, L.P.
Energy Transfer Equity is a master limited partnership that owns the general partner and 100% of the incentive distribution rights (IDRs) of Energy Transfer Partners, L.P. and Sunoco L.P. (NYSE: SUN). ETE also owns Lake Charles LNG Company. ETE and its Companies own and operate a diverse portfolio of natural gas, natural gas liquids, refined products, and crude oil pipelines, as well as retail and wholesale motor fuel operations and LNG terminalling.
About Energy Transfer Partners, L.P.
Energy Transfer Partners is a master limited partnership which was formed in April 2017 with the merger of Energy Transfer Partners and Sunoco Logistics Partners (SXL). ETP owns one of the largest and most diversified portfolios of energy assets in US including natural gas midstream, intrastate and interstate transportation and storage assets, crude oil, natural gas liquids (NGL), and refined product transportation and terminalling assets, NGL fractionation, and various acquisition and marketing assets. ETP's general partner is owned by ETE.
Stock Performance Snapshot
January 17, 2018 - At Wednesday's closing bell, USA Compression Partners' stock rose 3.18%, ending the trading session at $18.18.
Volume traded for the day: 416.68 thousand shares, which was above the 3-month average volume of 87.45 thousand shares.
Stock performance in the last month - up 8.60%; previous three-month period - up 7.19%; past six-month period - up 2.89%; and year-to-date - up 9.92%
After yesterday's close, USA Compression Partners' market cap was at $1.37 billion.
Price to Earnings (P/E) ratio was at 125.38.
The stock has a dividend yield of 11.55%.
The stock is part of the Basic Materials sector, categorized under the Oil & Gas Equipment & Services industry. This sector was up 0.5% at the end of the session.
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