Energy Transfer’s acquisition of SemGroup will increase its scale in multiple regions while giving it increased connectivity for its crude oil and NGL transportation businesses


Energy Transfer to acquire rival midstream company SemGroup (Credit: Pixabay)

Texas-based Energy Transfer has agreed to acquire rival US midstream company SemGroup for about $5.1bn (£4.11bn) in a stock-cum-cash deal.

The total consideration includes the assumption of the Oklahoma-based SemGroup’s debt by Energy Transfer.

Through the acquisition, Energy Transfer will increase its scale in multiple regions and will gain increased connectivity for its crude oil and NGL transportation operations.

The Texan midstream company will also strengthen its crude oil transportation, terminalling and export capabilities significantly by adding SemGroup’s Houston Fuel Oil Terminal (HFOTCO), which has a crude oil storage capacity of 18.2 million barrels.

Energy Transfer expects to build a new crude oil pipeline called the Ted Collins Pipeline that will connect HFOTCO to the company’s Nederland Terminal.

The merger with the Oklahoma-based midstream company will also expand Energy Transfer’s crude oil and NGL infrastructure. This will be through the addition of crude oil gathering assets in the DJ Basin, the Anadarko Basin, and also crude oil and natural gas liquids pipelines between the two basins with crude oil terminals in Cushing, Oklahoma.

The acquisition is also expected to give Energy Transfer a substantial crude oil gathering and transportation footprint in the Alberta Basin in western Canada.

Terms of the Energy Transfer, SemGroup merger deal

As per the terms of the deal, the Texan midstream company is offering to buy SemGroup for $17 (£13.69) per share through a combination of $6.80 (£5.48) in cash and 0.7275 of its shares. Upon closing of the transaction, SemGroup’s shareholders are expected to own nearly 2.2% of Energy Transfer’s outstanding common units.

SemGroup CEO Carlin Conner said: “This strategically and financially compelling combination will result in SemGroup joining one of the largest midstream energy companies in the country, with a strong footprint in all major U.S. production basins.

“The combined entity’s size, scale and financial profile will ensure that SemGroup’s assets, including our Gulf Coast terminal, mid-continent footprint and our Canadian joint venture SemCAMS Midstream, benefit from significant growth well into the future. We look forward to leveraging the increased pipeline connectivity and expanded terminalling infrastructure that the combined entity provides.”

Subject to the approval by SemGroup’s shareholders and other customary regulatory approvals, the transaction is likely to be completed in late 2019 or early 2020.

Earlier this year, Energy Transfer commissioned the Mariner East 2 pipeline, a 563km long underground natural gas liquids (NGLs) pipeline laid across Ohio, West Virginia and Pennsylvania.