The first half of 2011 saw major midstream financial transactions, either announced or completed, totaling nearly $40 billion. Debt deals, representing some $10.6 billion, outpaced equity deals, representing some $8 billion, as debt transactions continue to be a cheap form of growth capital.

Announced mergers and acquisitions, either announced or closed, totaled slightly more than $20 billion. Although acquisitions greatly outnumbered mergers in number, (39 acquisitions to three mergers), total values were for each category were nearly equal. Specifically, by mid-year, acquisitions deals totaled about $9.9 billion, while three mergers represented slightly more than $10.3 billion in deal value.

To date, the largest deal is the proposed merger of Energy Transfer Equity LP and Southern Union Co. When completed, ETE will acquire Southern Union for $7.9 billion, including some $3.7 billion of existing debt, creating one of the largest integrated midstream companies in the U.S. natural gas industry.

Midstream financial activity, and especially private-equity investment, is expected to continue at a fast clip, according to Ben Davis, a partner at Energy Spectrum Capital. The private-equity firm has some $640 million invested in midstream companies via its three most recent funds, Energy Spectrum Partners IV, V and VI, and finished raising some $998 million ESP VI in April.

“As a whole sector, private equity is really stepping up to the plate to fund new midstream management teams needed in the developing shale plays,” says Davis.

“The new shale plays are very prolific, which makes for attractive economics, especially where there is oil or rich-gas production. I think shale plays will continue to be some of the more attractive development opportunities in the U.S. for many years.” For more comments by Davis, read “Private Money” in this issue.

SELECTED JUNE 2011 TRANSACTIONS
Company Transation type Ticker Symbol $, millions Comments
Appalachian Midstream Partners LLC Equity AMP 169 Equity investment by Avista Capital Partners.
NiSource Inc. Debt NI 400 5.95% senior notes due 2041 to repay short-term borrowings.
Regency Energy Partners LP Debt RGNC 500 Senior notes due 2021.
Southern Natural Gas Co. Debt SNG 300 4.4% senior notes due 2021, at 99.911% of par to yield 4.411%.
Spectra Energy Partners LP Debt SEP 500 $250 million of 2.95% due 2016 and $250 million 4.6% due 2021.
Western Gas Partners LP Debt WES 500 5.375% senior notes due 2021 at 98.778% of face value.
Buyer Merger, Acquisition Seller $, millions Comments
Algonquin Power & Utilities Corp. A Atmos Energy Corp. 124 To acquire natural gas distribution assets in Missouri, Iowa and Illinios.
Cardinal Gas Storage Partners LLC A High Sierra Monroe LLC 148 Acquired Monroe Gas Storage Co. LLC and rights to depleted gas reservoir.
DCP Midstream LLC A ConocoPhillips 750 Acquired Seaway Products Pipeline Co., will rename Southern Hills Pipeline and convert to NGL service.
Energy Transfer Equity LP M Southern Union Co. 7,900 Combined 44,000 miles of pipeline, 30.7 Bcf/d capacity, one of the largest U.S. gas systems.
Kinder Morgam Energy Partners LP A Petrohawk Energy Corp. 920 To acquire Petrohawk's 50% interest in Kinder Morgan Field Services and 25% interest in Eagle Ford midstream assets.
Spectra Energy Partners LP A EQT Corp. 390 To acquire 171 MMcf/d Big Sandy Pipeline LLC in eastern Kentucky.