Atlas Energy press release:
| Atlas Energy, L.P. Announces Atlas Pipeline’s Acquisition of Eagle Ford Midstream Business for $1 Billion | Atlas Energy’s (ATLS) midstream subsidiary, Atlas Pipeline (APL) to acquire TEAK in a transformational transaction for APL and ATLS, providing a strong midstream position with immediate fee-based cash flow in one of the most prolific U.S. oil & gas basins Annualized fourth quarter 2014 EBITDA from the acquired TEAK assets is expected to reach approximately $160 million, of which currently 80% is fee-based The acquisition will also add substantial cash flow to ATLS, expected in excess of $25 million to $40 million in annual distributable cash flow, or approximately $0.45 to $0.75 per unit, as the assets mature ATLS will invest $20 million in newly issued APL preferred units as part of the financing of the TEAK transaction PHILADELPHIA--(BUSINESS WIRE)--Apr. 16, 2013-- Atlas Energy, L.P. (NYSE: ATLS) (“Atlas Energy” or “ATLS”) announced today that its midstream subsidiary, Atlas Pipeline Partners, L.P. (NYSE: APL) has executed a definitive agreement to acquire 100% of the equity interests of TEAK Midstream, L.L.C. (“TEAK”), a privately owned midstream operator, for $1 billion in cash. TEAK is a natural gas gathering and processing company with assets in the core of the Eagle Ford Shale in south Texas, one of the most highly prolific oil & gas basins in the U.S. The transaction is expected to close in the second quarter 2013, subject to customary closing conditions.
Based on the forecasted earnings and cash flow from the TEAK assets, ATLS expects to receive an additional $25 million to $40 million of annual distributable cash flow as the acquired assets grow and mature in the future. This represents approximately $0.45 to $0.75 per ATLS common unit of additional distributable cash flow on an annualized basis.
This acquisition is a transformational transaction for APL and ATLS, establishing a leading midstream position for APL in the Eagle Ford Shale. Primary highlights of the TEAK assets include:
The assets being acquired include a 200 MMcfd cryogenic processing plant (“Silver Oak I”), 265 miles of 20”-24” high pressure rich gas gathering lines with 750 MMcfd of throughput capacity, and a second 200 MMcfd cryogenic processing plant (“Silver Oak II”), which is expected to be delivered to the Partnership for installation in May of 2013 and be in service during the first quarter of 2014. Total capital expenditures associated with the build-out of Silver Oak II and other projects are expected to be approximately $100 million over the next year. Approximately 80% of TEAK’s current gross margin is derived from fixed fee contracts, with the majority of those volumes under minimum volume commitments. Pro forma for the transaction, the overall cash flow mix to APL is expected to be over 50% fixed fee by the end of 2014. APL expects further expansion of the acquired Eagle Ford assets beyond 2014, including the potential to add a third 200 MMcfd processing facility and additional gathering pipelines among other projects. Management will discuss the acquisition on the first quarter earnings call scheduled for May 1, 2013 Atlas Energy will invest $20 million of $400 million in newly issued Class D convertible preferred APL units in conjunction with the financing of the TEAK acquisition. The preferred units are convertible to APL common limited partner units at APL’s option after the first anniversary of the issuance, and mandatorily convertible into common limited partner units at the end of eight full calendar quarters following the issuance. Atlas Energy will receive additional APL preferred units at a specified premium in lieu of cash distributions for the first year following the issuance of the preferred units, after which ATLS will receive its proportion of cash distributions prior to conversion to APL common units.
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