Atlas Pipeline Partners, L.P. (NYSE:APL) will sell its NOARK natural gas gathering and interstate transport system to Spectra Energy Partners, LP (NYSE:SEP) for $300 million in cash. The company’s president and CEO said that the cash from this sale, plus the cash from an earlier transaction with the Williams Companies, Inc. (NYSE:WMB), will be used to reduce the company’s debt by $400 million. Atlas had about $1.5 billion in long-term debt at the end of December 2008.
Atlas plans to continue working on other deals to “generate additional cash and further de-lever our company.” The deal with Williams is a joint venture to be called Laurel Mountain Midstream LLC which will include a gathering system in the Marcellus Shale play in southwestern Pennsylvania. In addition to $90 million in cash from Williams, Atlas gets a $25.5 million “obligation” from Williams to be paid out in equal installments over three years and a 49% equity interest in Laurel Mountain Midstream. Atlas also plans to sell some assets to the new venture for a cash price of $12 million.
Shedding assets to pay off debt is nothing particularly new, but in the pipeline business it is fairly unusual. Selling off bits of pipeline assets reduces the the amount of cash a company can generate and spread around among its limited partners.
Atlas is the junior partner in the deal with Williams, with Williams holding the majority interest and being the operator of the Laurel Mountain system. What Atlas got was cash in exchange for the assets it put into the joint venture. Now, Atlas is selling its highest throughput system, Ozark Gas Transmission, which is part of NOARK. That’s more than 442 million cubic feet per day of throughput, much of it at FERC-regulated rates. Atlas has had to sell one of its crown jewels.
Pre-open trading shows Atlas up nearly 9% on news of the sale.
Paul Ausick
April 8, 2009
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