Energy Transfer Partners L.P. (ETP), through its wholly-owned subsidiary – La Grange Acquisition – entered into a sale agreement, worth $207 million, with midstream energy firm Summit Midstream Partners.
Per the deal, Summit Midstream will acquire a natural gas production company – ETC Canyon Pipeline from La Grange. The operations of Canyon Pipeline involve collection and production of natural gas from the Piceance and Uinta basins in Colorado and Utah.
Summit Midstream will take over the gas gathering and processing system including about 1,600 miles of pipe, 44,000 horsepower of compression and processing assets with a total daily capacity of 97 million cubic feet. The company also plans to acquire two natural gas liquids (NGL) injection stations.
The deal, with certain customary approvals impending, may be closed in the last quarter of 2012.
Dallas, Texas-based Energy Transfer Partners is a master limited partnership that owns and operates a diversified portfolio of energy assets. The partnership is engaged primarily in the gathering, processing, storage and transportation of natural gas.
We believe that Energy Transfer is well positioned to compete in the natural gas midstream and transportation and storage businesses with its geographically-dispersed asset mix. The partnership has significant market presence in each of its operating areas, which are located in all major natural gas-producing regions of the U.S.
Additionally, the proposed acquisition of Philadelphia-based refining and petroleum product marketing company, Sunoco Inc. (SUN) for $5.3 billion will help Energy Transfer to diversify its portfolio by adding crude and refined products pipelines to the partnership’s existing natural gas and NGL infrastructure.
On the flip side, we remain concerned about the continued challenging macro environment and cost overruns on expansion projects (which lead to lower returns). As such, we expect the Energy Transfer units to perform at par with the broader market and maintain our long-term Neutral recommendation.
Energy Transfer currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
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