NGL Energy To Acquire Hillstone Environmental For $600M

NGL Energy Partners LP (NYSE:NGL) recently announced that it has entered into a definitive agreement with Golden Gate Capital for acquiring the latter’s Hillstone Environmental Partners, LLC for around $600 million.

Hillstone Environmental is a water pipeline and disposal infrastructure solutions provider in parts of West Texas and New Mexico. With this buyout, NGL Energy plans to combine Hillstone services with its existing Delaware Basin platform to optimize operational services for its producer customers.

The to-be-acquired assets include Hillstone’s 19 salt water disposal wells that represent roughly 580,000 barrels per day of permitted disposal capacity. NGL Energy will also get a newly-built produced water pipelines system that can carry up to 680,000 barrels per day. Moreover, Hillstone possesses 22 permits, which can be utilized to add another 660,000 barrels per day of disposal capacity. Importantly, Hillstone has more than 110,000 acres under long-term contracts.

With this acquisition, this Oklahoma-based midstream services provider anticipates that it will boost its water services in their existing Delaware Basin. Earlier this year, NGL Energy acquired New Mexico-based Mesquite Disposals Unlimited LLC’s water pipeline transportation and disposal assets. Together with the Hillstone integration, the partnership will be able to significantly increase its operational disposal capacity in Delaware Basin to nearly 2.7 million barrels per day.

Apart from the aforementioned acquisition, NGL Energy has agreed on issuing Class D Preferred Units by launching a $200-million private placement. This will help the partnership fund a portion of the Hillstone acquisition. The remainder of the acquisition amount will be arranged by the partnership in a way that it won’t affect the company’s leverage and is unlikely to include additional equity issuance. The transaction, which NGL Energy expects to materially improve its distributable cash flow per unit in fiscal 2020 and beyond, is subject to customary conditions and is scheduled to be completed by this year-end.

NGL Energy is a limited partnership operating a vertically-integrated propane business with three operating segments: retail propane, wholesale supply and marketing plus midstream. The Retail Propane segment engages in retail marketing, sale and distribution of propane while the Wholesale Supply and Marketing segment supplies propane and other natural gas liquids besides providing related storage to retailers, wholesalers and refiners. The Midstream segment involves in the delivery of propane from pipelines or trucks to propane terminals.

Zacks Rank & Key Picks

NGL Energy carries a Zacks Rank #3 (Hold). Better-ranked players in the energy space include BP (LON:BP) Midstream Partners (NYSE:BPMP) , Dril-Quip, Inc. (NYSE:DRQ) and TC Pipelines, LP (NYSE:TCP) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BP Midstream’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters.

Dril-Quip earnings beat the Zacks Consensus Estimate in three of the previous four quarters.

TC Pipelines earnings beat the Zacks Consensus Estimate in three of the last four quarters.

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