Energy Transfer to Acquire SemGroup in $5-Billion Deal

(September 30, 2019) — Energy Transfer LP (Dallas) has a merger deal in place to acquire SemGroup Corp. (Tulsa) in a stock and cash transaction valued at about $5 billion, which includes assumption of debt. The transaction is expected to close late this year or early next year, subject to the approval of SemGroup stockholders and regulatory approvals. Noted is that Energy Transfer’s acquisition of SemGroup will increase the company’s scale across multiple regions and provide greater connectivity for its crude oil and NGL transportation businesses.

Energy Transfer will significantly strengthen its crude oil transportation, terminal operations, and export capabilities with the addition of the Houston Fuel Oil Terminal (HFOTCO), a world-class facility on the Houston Ship Channel with 18.2 MMbbl of crude storage, five deep-water docks, and seven barge docks. HFOTCO is supported by stable take-or-pay cash flows from diverse, primarily investment-grade customers. To enhance capabilities, Energy Transfer plans to construct a new crude oil pipeline, the Ted Collins Pipeline, to connect HFOTCO to its Nederland, Texas terminal.

The purchase also expands Energy Transfer’s crude oil and NGL infrastructure by adding crude gathering assets in the Denver-Julesburg Basin in Colorado and the Anadarko Basin in Oklahoma and Kansas, as well as crude oil and natural gas liquids pipelines connecting the Denver-Julesburg and Anadarko basins with terminals in Cushing, Okla.

The assets will greatly increase Energy Transfer’s crude and NGL transportation businesses in the Rockies and Mid-Continent and will complement its existing crude and NGL operations in the Permian Basin. Energy Transfer’s crude oil assets on the Gulf Coast will also benefit from the Maurepas Pipeline and its connections to the St. James refining complex. The acquisition will also provide a significant crude oil gathering and transportation presence in the Alberta Basin in western Canada. The combined companies’ significant infrastructure will allow it to pursue additional commercial opportunities and achieve cost savings.

Further, the new Ted Collins Pipeline, a 75-mile crude oil line linking the Houston Ship Channel and Nederland, will provide a strategic connection between two of the largest oil terminals in the U.S. The pipeline, in conjunction with the combined companies’ oil transportation assets, will provide Energy Transfer customers with access to the Houston, Beaumont/Port Arthur, and St.
James markets.

This will provide immediate access to more than 1 MMbbld of existing oil export capacity, with plans to expand to over 2 MMbbl at the Nederland and HFOTCO terminals. Ted Collins is expected to have an initial capacity of more than 500,000 bbld, with commercial operations expected to commence in 2021. Energy Transfer’s network of pipelines, which handle more than 4 MMbbld, will also allow customers the flexibility to access the company’s very large crude carrier, or VLCC, project planned at the Nederland terminal.

(SOURCE: The Weekly Propane Newsletter, September 30, 2019. Available by subscription)