Regency Energy Partners LP, Southern Union Gathering Company, LLC - M&A Call
February 28, 2013 2:50 PM ET
Regency Energy Partners LP (RGP)
February 28, 2013 10:00 am ET
Michael J. Bradley - Chief Executive Officer of Regency Gp Llc, President of Regency Gp Llc and Director of Regency Gp Llc
Thomas E. Long - Chief Financial Officer of Regency Gp Llc and Executive Vice President of Regency Gp Llc
Gabriel P. Moreen - BofA Merrill Lynch, Research Division
Michael J. Blum - Wells Fargo Securities, LLC, Research Division
Ethan H. Bellamy - Robert W. Baird & Co. Incorporated, Research Division
Heejung Ryoo - Barclays Capital, Research Division
Good day, ladies and gentlemen, and welcome to the Regency Energy Partners to Acquire Southern Union Gathering Company, LLC Conference Call. My name is Lisa, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Ms. Lyndsay Hannah, Manager of Finance and Investor Relations. Please proceed.
Good morning, everyone, and welcome to our call. Yesterday, Regency announced the transaction of significant importance. Shortly, we will be hearing from Mike Bradley, President and Chief Executive Officer; and Tom Long, our Chief Financial Officer, regarding this transaction. Following our prepared remarks, Regency will open the call for questions. You may access the press release and presentation used on today's call through Regency's website at regencyenergy.com. Our call is being recorded and is also broadcast live over the Internet on the Regency corporate website. An archive of the webcast and presentation will be available on the website following today's call.
Slide 2 of the presentation describes our use of forward-looking statements and lists some of the risk factors that may affect actual results. You are reminded that actual results may differ materially from any forward-looking statements. You should refer to our SEC filings for a more complete discussion of the risks involved in our business and in the ownership of our limited partnership units.
Please note, the transaction we'll be speaking about today is subject to approval under the Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions.
With that, I will turn the call over to our CEO, Mike Bradley.
Michael J. Bradley
Thanks, Lyndsay. Hello, everyone, and thank you for joining us on our call this morning. We are very excited to have the opportunity to share with you a very strategic and significant growth opportunity for Regency, which was announced yesterday. I'll begin with some of the key highlights, and then Tom will review more details on the transaction.
Regency has entered into an agreement to purchase Southern Union Gas Services, Ltd. or SUGS from Southern Union Company, which is a jointly owned affiliate of Energy Transfer Equity and Energy Transfer Partners, for $1.5 billion. SUGS owns and operates 5,600 miles of gathering and NGL pipeline, along with 5 natural gas processing and 5 treating facilities in the Permian Basin. These assets are highly complementary and will significantly expand our West Texas operations in a very strategic basin for us and with the increased size and scale, improve our ability to serve producers in the area, as well as add to our list of organic growth opportunities. Further, we expect this acquisition to be neutral to slightly accretive to Regency in 2013 but enhance our outlook for long-term distribution growth. We anticipate this transaction will close in the second quarter of this year and, as Lyndsay mentioned, is subject to HSR approval and other customary closing conditions.
I think very importantly, looking at the strategic rationale for this transaction, these assets are in an excellent fit with our existing natural gas and natural gas liquids operations, and the integration of these assets will significantly expand Regency's footprint in the Permian Basin in West Texas and southeastern New Mexico while increasing the size and scale of our core gathering and processing business. By combining these systems, we also expect to achieve a range of operational synergies that we believe will create further value for our customers and our unitholders. We anticipate greater flexibility in processing and treating options from the ability to direct gas flows between the combined facilities and optimize plant performances. As a result, we should see increased processing capabilities, improved reliability and reduced cost across the integrated systems. Additionally, the combined systems will also enhance our ability to serve our customers in West Texas by providing a comprehensive midstream natural gas and natural gas liquids platform with excellent downstream connectivity.
With a high level of producer activity in the Permian Basin, driven by oil and liquids, we believe this acquisition will provide a strong and strategic platform on which to further expand our West Texas and New Mexico services through ongoing and proposed large-scale organic growth projects. SUGS is currently constructing a new 200 million a day cryogenic processing plant with associated treating facilities. The new Red Bluff facility is expected to be on service in the second quarter of this year. A second 200 million a day cryogenic processing facility is currently in the planning stages and is expected to come online in mid-to-late 2014. We expect these expansions, as well as future expansion opportunities, to provide additional accretion over time. We've always felt these assets were a great fit for Regency and are very pleased to see this transaction come together.
With that, I'll turn it over to Tom, who will walk you through more details on the transaction.
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