As Tony the Tigerrrrr would say:
"This is grrreeeeaaaaatt news:
NGL Energy Partners LP Announces Sale Of Remaining Retail Propane Business For $900 Million; Co. To Completely Exit Retail Propane Business And Re-Deploy Capital In Water Solutions And Crude Logistics
4:13 pm ET May 30, 2018 (Benzinga) Print
TULSA, Okla.--(BUSINESS WIRE)-- 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:
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
Proceeds will be used to significantly reduce leverage and enhance liquidity
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
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
NGL’s financial strategy will transition to a “self-funding” model for internal growth opportunities highlighted by low leverage and high distribution coverage.
In simple terms, NGL is looking to avoid having to pay market rates when borrowing to finance something new. Too, we now are focusing on four divisions instead of five---with Retail Propane the guy pushed outside.
This is something we've been discussing because it has become clear that propane has had us at the mercy of warm Winter conditions and it's left us scraping for positive identity. SA will probably like this although I don't exactly give a crap about them.
Focus will be more (as of now) on the water and logistics areas. This delights me, personally. It's great news. I believe propane has been the Achilles because NGL was founded on retail propane and not the other focal areas. It's never easy letting go of structural cornerstones and I'm so impressed that Mike and Trey pulled it off.
Distribution coverage will be nicely improved as a result of this. To me it spells thoughts of increasing distributions, themselves, for coverage on the increase tells us DCF is also expected to be increasing.
Dang! I'm so pleased for us all!! This has not been an easy road---not even for me with more than 24 units at my disposal. lol I'm the guy who added units last week and got teased by Trueheart. You gotta love the guy---teasing is one of my cornerstones and I'm always up for it whether coming or going. Teases are great indications of friendship.
We are out of the propane biz! Amazing! It was our most conspicuously vulnerable place. I don't know where NGL will open in the morning but I'm betting it will be higher than today's close.
Congratulations, everybody! This is wonderful news for us longs.
