Atlas Pipeline Partners (APL) to Acquire Cardinal Midstream in $600M Cash Deal

December 3, 2012 4:10 PM EST
Atlas Pipeline Partners, L.P. (NYSE: APL) has executed a definitive agreement to acquire all equity interests representing all of the operating assets of Cardinal Midstream, LLC ("Cardinal"), a privately owned midstream operator, for $600 million in cash. The transaction, which is expected to close by the end of 2012, is subject to certain regulatory approvals, customary closing conditions, and purchase price adjustments.

As a result of the transaction, the partnership is increasing EBITDA guidance for 2013 by over 20% from $250-300 million to $310-360 million. The transaction is expected to be immediately accretive to distributable cash flow per unit by 3-5% in 2013 and 8-10% in 2014. Expected EBITDA from the Cardinal assets is forecasted to be approximately $60 million in 2013, and approximately $70 million and $80 million in 2014 and 2015, respectively.

The owned and/or operated assets will include three cryogenic processing plants totaling 220 MMcfd in processing capacity, 66 miles of associated gathering pipelines, and a gas treating business that includes 17 treating facilities located in numerous hydrocarbon basins. Over 80% of Cardinal's current gross margin is derived from fixed fee contracts.

As a result of the transaction, the Partnership will own 100% of the following assets:

* A 120 MMcfd cryogenic processing facility (the Tupelo plant) in the Arkoma Woodford basin;
* Approximately 60 miles of gathering lines that gather both rich and lean gas;
* 28,500 horsepower compression capability, including a 42 MMcfd compression facility and a treating facility; and
* A gas treating business, which includes contract gas treating operations in multiple shale plays including the Woodford, Eagle Ford, Granite Wash, Avalon, Haynesville, and Fayetteville shales. Included are 15 amine treating facilities as well as two propane refrigeration facilities. The business generates fixed fee cash flow through the treatment of wellhead volumes to reduce impurities and is 100% fixed fee cash flow

Additionally, the Partnership will acquire a 60% interest in the Centrahoma joint venture ("Centrahoma") that currently exists between Cardinal and MarkWest Energy Partners, L.P. (NYSE: MWE) ("MarkWest"). The Partnership will be the operator of the Centrahoma JV assets following the transaction. The Centrahoma JV currently owns the following assets:

* Two cryogenic facilities: the Coalgate plant and the Atoka plant, with current processing capacity of 80 MMcfd and 20 MMcfd respectively; and
* 15 miles of NGL pipeline

All three processing facilities are currently fully utilized. As previously agreed to by Cardinal and MarkWest, the Centrahoma JV is expected to expand in late 2013 by installing a new 120 MMcfd plant ("Stonewall plant") which will be scalable to 200 MMcfd with development in the area. Incremental cost for the Stonewall plant expansion to process the full 200 MMcfd is currently expected to be less than $50 million net to the Partnership.

Deutsche Bank Securities acted as financial advisor on the transaction. Jones Day (Houston) and Ledgewood (Philadelphia) acted as legal advisors on the transaction.

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