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Energy Transfer, Laclede Seal $975M Deal

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Natural gas pipeline operator, Energy Transfer Partners LP (ETP) reported the completion of the divestiture of the assets of Missouri Gas Energy (:MGE) to a subsidiary of utility gas distribution company The Laclede Group, Inc. (LG). MGE belongs to Southern Union Company, which is a fully owned affiliate of Energy Transfer. Earlier on Jul 17, 2013, Missouri Public Service Commission, an independent regulatory body, permitted the sale of the MGE properties.

Energy Transfer reveals that the sale was completed on Sep 1, 2013 and the net proceeds from the transaction were roughly $975.0 million.  

Energy Transfer added that the divestment of the natural gas distribution properties of New England Gas Company (:NEG) -- Southern Union’s division -- is expected to be over by the fourth quarter of 2013. The deal is projected to contribute roughly $60.0 million after deducting debt. However, the contract is subject to approval from the regulators.

The divestment of the MGE and NEG assets by Southern Union is part of Energy Transfer’s efforts to get rid of properties that do not fit into the partnership’s long-term growth plan. The midstream entity expects to use the transaction proceeds to pay off debt under its revolving credit facility.

Dallas-based Energy Transfer is a master limited partnership (MLP) engaged primarily in the gathering, processing, storage and transportation of natural gas.

Energy Transfer is well-positioned to compete in the natural gas midstream and transportation & storage businesses with its geographically-dispersed asset mix. The partnership has a significant market presence in each of its operating areas, which are located in major natural gas-producing regions of the U.S.

However, acquisitions have historically played a major role in the partnership’s growth profile and are expected to remain significant in the future as well. Energy Transfer may find it difficult to complete accretive transactions in the future, which could negatively impact its growth rate.  
Energy Transfer currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

However, one can look at oil and gas production pipeline MLPs like Delek Logistics Partners LP (DKL) and Sunoco Logistics Partners LP (SXL) that offer value. Both the stocks sport a Zacks Rank #2 (Buy).

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