Two deals were announced in the energy sector Tuesday that involved 58 Texas lawyers at six different firms and $9.6 billion in enterprise value
Latham & Watkins worked on aspects of both of them.
Pennsylvania-based UGI Corp. said it was buying the 69.2 million units it didn’t already own of AmeriGas for cash and stock worth $2.4 billion, giving AmeriGas an enterprise value of around $6 billion, including debt.
Stonepeak Infrastructure Partners said it was acquiring Oryx, the largest privately held midstream crude operator in the Permian Basin, from Quantum Energy Partners, Post Oak Energy Capital, Concho Resources, WPX Energy and others for $3.6 billion.
Latham & Watkins represented UGI in the transaction with a Houston-based corporate team led by partners Ryan Maierson and John Greer with associates Kevin Richardson, Dan Harrist, Blake Berkey, Erin Lee and Hillarie James.
Specialists included Houston partners Tim Fenn and Bryant Lee with associate Jared Grimley on tax matters and Houston partner Joel Mack on environmental matters.
Baker Botts provided legal advice to AmeriGas, including partners Josh Davidson and A.J. Ericksen, senior associate Eileen Boyce and associate Catherine Ellis, all of Houston.
Partner Mike Bresson and senior associate Jared Meier pitched in on tax matters and partner Rob Fowler did so on benefits.
Potter Anderson & Corroon represented the audit committee to AmeriGas Propane Inc.’s board.
The financial advisors included Tudor, Pickering, Holt & Co. for AmeriGas (Lance Gilliland in Houston) and JP Morgan Securities for UGI.
Shearman & Sterling and Vinson & Elkins counseled Oryx on its sale and Hunton Andrews Kurth and Sidley Austin represented Stonepeak.
The Shearman team was led by Houston partners Sarah McLean (M&A) and Todd Lowther (tax) and associates Monica Raspino, Doug Goldstein and Devon Yamauchi (tax). Other associates on the deal were Sarah Nealis, Alix Charles and Kelli Sims.
The V&E team included senior associate Robert Hughes and partner Keith Fullenweider with assistance from associate Sara Bloom.
Also advising were partner John Lynch on tax; partner Sean Becker (labor/employment); partner Stephen Jacobson and associate Mary Daniel Morgan (executive compensation/benefits); partner David Wicklund and associate Caitlin Snelson (finance); partners Bryan Loocke and Danielle Patterson and associate Jeremy Tripp (energy transactions/projects); and senior associate Matt Dobbins (environmental).
Hunton AK’s group was made up of partners Mike O’Leary, Courtney Cochran Butler, Taylor E. Landry, O’Banion Williams, Tom Ford, Allison Mantor, Lisa Shelton, Tony Eppert and Harve Truskett. The associates were Erin Juvenal, Marshall Heins, Emily Cabrera, Ming Lei and Alex Miron.
Partners Tim Chandler and Zackary Pullin led Sidley’s team, which included associates Tommer Yoked and Adam Prestidge.
Latham & Watkins represented the lender group, including Houston associate Benjamin T. Gelfand. Stonepeak’s fund counsel is Simpson Thatcher & Bartlett with lawyers in New York.
Financial advisors included Barclays for Stonepeak and Jefferies and Citi for Oryx and its sellers.
A Barclays-led arranger group including Goldman Sachs, RBC Capital Markets and Jefferies provided a $1.5 billion term loan B to support the transaction.
The deal will include a refinancing of Oryx Southern Delaware Holdings’ existing facility and the consolidation of Oryx Southern Delaware Holdings and Oryx Delaware Holdings into a single borrower.
In the AmeriGas/UGI deal, AmeriGas unitholders will receive half of a share of UGI common stock and $7.63 in cash for each of their common units, or $35.33 per unit – a 13.5 percent premium over Monday’s close. AmeriGas unitholders will continue to receive a 95 cents per unit distribution for each quarter completed before the deal closes, which is expected in the fourth quarter.
The sale came after a 120-day strategic review AmeriGas initiated in December to study its structure and leverage with the goal of producing a “strong and stable” entity.
Jefferies analyst Christopher Sighinolfi said the deal was an “elegant solution” with benefits for all.
Those include a healthy premium for AmeriGas unitholders and participation in an enhanced UGI story (due to the shares involved in the deal) and an improved earnings per share profile and an estimated $200 million more per year in cash flow for UGI and a 25 percent dividend raise for its shareholders.
“Today’s merger announcement represents the most compelling outcome for all parties,” he said.
That deal requires approval from a majority of AmeriGas unitholders but should close in the fourth quarter.
Stonepeak said its purchase, which included Oryx Southern Delaware Holdings and Oryx Delaware Holdings, represents an ideal platform for providing crude oil transportation services in the Permian, which is well-positioned to capitalize on growing production.
Raymond James analyst John Freeman said the deal came together much faster than expected but at a lower deal value. He said WPX Energy’s sale of its 25 percent stake will save it around $40 million in planned equity investments this year and open the door for possible acceleration of returns to shareholders.
“In the near term, we expect WPX to apply the cash proceeds to its balance sheet in an effort to get leverage down to the 1 to 1.5 times range [it’s currently at around 2 times],” he said.
Simmons Energy analyst Ryan Todd said the deal should be viewed positively for Concho as well as it delivers a solid return on investment, “bringing long-term value forward that was likely underappreciated.”
WPX has completed nearly $500 million in midstream monetizations this year combined with the earlier sale of its 20 percent stake in WhiteWater’s Agua Blanca system, Freeman added.
Oryx will keep its name and continue to be headquartered in Midland. Its leadership team, led by Brett Wiggs and Karl Pfluger, will remain in their current roles and are investing alongside Stonepeak in the transaction.
Stonepeak said Oryx owns and operates a crude oil gathering and transportation system underpinned by nearly one million acres under long-term dedications from more than 20 customers, including many of the Permian’s top oil and gas producers.
The system’s 2.1 million barrels of storage and 1,200 miles of in-service and under-construction pipeline span eight counties in Texas and two in New Mexico, a footprint across the Delaware Basin’s core that features the most economic and long-lived drilling resource in the U.S., Stonepeak said.
Once construction is complete on the remaining part of the system, Oryx’s Delaware Basin transportation capacity will ultimately exceed 900,000 barrels per day and access multiple takeaway options, providing customers the differentiated service flexibility they need to maximize the value of their production, Stonepeak said.
Dheeraj Verma and Garry Tanner led the deal from Quantum, which has managed more than $16 billion in equity commitments since its 1998 inception.
Frost Cochran spearheaded the transaction from Post Oak, which was founded in 2006 and closed its third fund in 2016 with $600 million in commitments. It committed $300 million to Oryx in 2014 along with Quantum, Wells Fargo Energy Capital, Oryx management and other private investors.
Jack Howell, a partner and head of Stonepeak’s energy business, said in a statement that Oryx is the most attractive private Permian midstream asset it’s evaluated and views it as a strategic platform and a core North American crude infrastructure asset.
“Our critical focus will be on continuing to provide Oryx’s diversified customer base with best in class service offerings to accommodate their growing production while also pursuing new commercial opportunities across the value-chain,” he said.
Stonepeak is an infrastructure-focused private equity firm with more than $15 billion in assets under management and offices in Houston, New York and Austin.