Regency Energy Partners L.P. (RGP) on Monday said it agreed to purchase
certain pipeline and processing-plant operations from Eagle Rock Energy
Partners L.P. (EROC) for $1.3 billion.
Regency, a master limited partnership that pays out much of
its profits to shareholders through tax-free distributions, is already a
major player in the natural-gas business in much of Texas, Oklahoma and
Louisiana.
The Dallas-based company owns thousands of miles of pipelines
that gather natural gas from wellheads and move it to processing
plants--which it also owns--and interstate pipelines.
The Eagle Rock purchase comes less than three months after
Regency Energy agreed to pay $3.8 billion for PVR Partners L.P. (PVR),
creating a large natural-gas pipeline and processing company focused on
shale formations from Pennsylvania to the Texas Panhandle.
Energy Transfer Equity L.P. (ETE) said it plans to support
Regency, which is part of the Energy Transfer family of partnerships, by
committing to purchase $400 million of Regency units as part of
Regency's acquisition deal with Eagle Rock. Energy Transfer plans to
acquire about 16.5 million Regency units effective as of and conditioned
on the closing of the deal.
The midstream assets being purchased as of Monday include
about 8,100 miles of gathering pipeline and over 800 million cubic feet
per day of processing plants. Regency said the deal will further
diversify its basin exposure in the Texas Panhandle, East Texas and
South Texas.
"We expect this acquisition to be immediately accretive to our
distributable cash flow per common unit and we also expect that this
acquisition will be accretive to distributable cash flow per common unit
on a pro forma basis," said Mike Bradley, president and chief executive
of Regency.
Following the deal, expected to close in the second quarter,
Regency said it expects to recommend to its board a distribution
increase that would represent a growth rate of 6% to 8% for 2014.
Separately, Regency also agreed to purchase the midstream
assets of Hoover Energy Partners for about $290 million. The company
said the purchase will complement its existing footprint in the southern
portion of the Delaware Basin.
Also, Energy Transfer Equity said it will initiate a
two-for-one stock split and unveiled a $1 billion buyback plan. The unit
split will occur by a distribution of one unit for each unit
outstanding and held by unit holders of record at the close of business
on January 13. The split is expected to be completed on January 24.
Assuming approximately 280 million units outstanding as of
December 31, 2013, ETE expects to have approximately 560 million units
outstanding following completion of the split. The partnership's
quarterly distribution amount going forward will reflect the split.