NGL Energy Partners LP Announces Sale of Remaining Retail Propane Business for $900 Million
NGL Energy Partners LP (NYSE:NGL) (“NGL,” “our,” or the “Partnership”)
today announced that it has signed a definitive agreement to sell its
remaining Retail Propane business to Superior Plus Corp. (“Superior”)
(TSX:SPB) for $900 million in cash proceeds. The Partnership has made
the strategic decision to completely exit the Retail Propane business
and re-deploy capital at a comparatively higher rate of return in its
Water Solutions and Crude Logistics businesses. NGL believes these
businesses have greater organic growth opportunities and with the
activity in the Partnerships core basins, including the Delaware Basin
and DJ Basin in particular, the returns on these opportunities for NGL
are expected to exceed those achievable in Retail Propane. The
transaction is subject to certain regulatory and other customary closing
conditions and is expected to close within 60 days.
A summary of the transaction includes:
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The Partnership is selling all of its remaining Retail Propane
business to a subsidiary of Superior Plus Corp. (TSX: SPB) for $900
million, representing more than 10x Fiscal 2018 Adjusted EBITDA
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Proceeds will be used to significantly reduce leverage and enhance
liquidity
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NGL is simplifying its operations by narrowing its lines of
business to four segments, with Crude Logistics and Water Solutions
being the Partnership’s primary growth platforms
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The transaction will significantly reduce the seasonality and
weather-dependency of NGL’s earnings and reducing maintenance capital
expenditures by an estimated $10 million per year
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NGL’s financial strategy will transition to a “self-funding” model
for internal growth opportunities highlighted by low leverage and high
distribution coverage
“Retail Propane has been a stable asset for NGL and has grown through
bolt-on acquisitions over time, but it is not a growth driver for the
Partnership in the future. The $900 million sales price for our
remaining propane assets allows for significant deleveraging of our
balance sheet and positions us to focus on, and reinvest in, our two
largest growth platforms which are Crude Logistics and Water Solutions,”
stated Mike Krimbill, CEO of NGL. “The management team and employees of
the Retail Propane business have done a remarkable job building the
footprint into one of the most envied positions in the United States
retail propane market. They have done it safely and responsibly, and we
want to thank them for all of their contributions to NGL. We look
forward to working closely with the Superior team to close this
transaction and expect to re-deploy the proceeds from this sale into
de-leveraging our balance sheet and growing our Water and Crude
businesses.”
“The recent divestitures of all of the Partnership’s retail propane
assets generated over $1.1 billion of gross cash proceeds, which equates
to a 2018 EBITDA multiple of over 10x,” stated Trey Karlovich, CFO of
the Partnership. “The energy infrastructure investor base is calling for
a self-funding model and this sale transaction strengthens our balance
sheet and allows us to fund all of our near-term internal growth
prospects without relying on the equity or debt capital markets.”
As part of its future financial strategy, NGL plans to immediately repay
certain indebtedness totaling approximately $800 million which includes
capital expenditures incurred though the first quarter of fiscal 2019,
with the remaining proceeds to be used for certain near-term strategic
growth opportunities, primarily in the Water Solutions segment. Upon the
closing of this transaction, NGL expects to achieve compliance leverage
of approximately 3.50x (calculated in accordance with NGL’s revolving
credit facility), with an expectation to stay at or below this level
going forward. This transaction and associated application of net
proceeds is expected to be neutral to slightly dilutive in near-term
cash flow per unit, with accretion being driven over time as a result of
certain growth opportunities that NGL is currently evaluating. The
Partnership continues to target distribution coverage in excess of 1.3x
on a trailing twelve month basis and expects to achieve that coverage
during Fiscal 2019.
Members of management will discuss the benefits of this transaction in
more detail on its already scheduled earnings call, which will take
place at 6:00pm EDT (5:00pm CDT) today, Wednesday, May 30, 2018.
Analysts, investors, and other interested parties may access the
conference call by dialing (800) 291-4083 and providing access code
3866869.
Advisors and Counsel
RBC Capital Markets LLC and Intrepid Partners LLC are acting as
financial advisors to NGL. McAfee Taft in Tulsa, Oklahoma and Winston &
Strawn LLP are acting as legal counsel.
Forward-Looking Statements
Certain matters contained in this Press Release include "forward-looking
statements." All statements, other than statements of historical fact,
included in this Press Release may constitute forward-looking
statements. Although we believe that the expectations reflected in these
forward-looking statements are reasonable, we cannot assure you that
these expectations will prove to be correct. These forward-looking
statements are subject to certain known and unknown risks and
uncertainties, as well as assumptions that could cause actual results to
differ materially from those reflected in these forward-looking
statements. Factors that might cause actual results to differ include,
but are not limited to, the risk factors discussed from time to time in
each of our documents and reports filed with the SEC.
Readers are cautioned not to place undue reliance on any forward-looking
statements contained in this Press Release, which reflect management's
opinions only as of the date hereof. Except as required by law, we
undertake no obligation to revise or publicly release the results of any
revision to any forward-looking statements.
About NGL Energy Partners LP
NGL Energy Partners LP is a Delaware limited partnership. NGL owns and
operates a vertically integrated energy business with five primary
businesses: Crude Oil Logistics, Water Solutions, Liquids, Retail
Propane and Refined Products and Renewables. NGL completed its initial
public offering in May 2011. For further information, visit the
Partnership’s website at www.nglenergypartners.com.
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