Houston-based entities Crestwood Equity Partners LP (NYSE: CEQP) and Crestwood Midstream Partners LP (NYSE: CMLP) today announced merging into one publicly traded company valued at $7.5 billion.
Both boards unanimously approved the deal giving Crestwood Midstream unitholders 2.75 units of Crestwood Equity for each unit of Crestwood Midstream they own, representing a 17 percent premium to Crestwood Midstream’s closing price as of May 5th.
“Over the last year, Crestwood has evaluated a number of strategic alternatives to improve our competitive position in the marketplace and unlock the true value of our asset portfolio,” said Robert G. Phillips, Chairman, President and CEO of Crestwood. “By combining our partnerships and simplifying our corporate structure, we are better able to execute on our strategic objectives of fundamental value creation through providing first-class customer service and by executing on organic expansion and acquisition opportunities around our portfolio of midstream assets.”
Today WTI crude prices reached a record high for 2015 trading at $62.08, only to settle at $60.22 by the end trading. Although the past week has seen an increase in crude prices, the industry has been slammed by six-year lows and oil declined by more than 50 percent from the previous high back in June of 2014. As a result of the decline, the industry suffered massive layoffs, lower rig counts, and companies reduced their 2015 capital expenditures.
Crestwood is following a string of oil service providers consolidating parts to stay competitive in a turbulent environment.
“Through all market cycles, particularly during periods of challenging commodity price cycles like we are currently enduring, cost of capital remains a critical driver of competitive positioning in the marketplace,” added Phillips. “We have visibility to greater than $3.0 billion of investment opportunities around our asset footprint largely focused on the majority of the premier shale plays in North America. The permanent elimination of our incentive distribution rights immediately improves our future cost of capital and better positions Crestwood to capture our share of the opportunities in front of us.”
Crestwood Equity’s operations also include an NGL supply and logistics business that serves customers in the United States and Canada.