Spectra Energy TO Acquire Noark Pipeline For $300M

Houston energy transporter Spectra Energy Partners LP agreed Wednesday, April 8, to buy all of Noark Pipeline System LP from Atlas Pipeline Partners LP for $300 million in cash, expanding its reach into two important natural gas-producing regions.
Atlas CEO Gene Dubay said in a statement that the deal, along with the recently announced sale of assets in the Marcellus Shale into a joint venture with Williams Cos., will allow it to pay down $400 million in debt. He said he is looking for other transactions to generate cash to reduce the Moon Township, Pa.-based company's debt.
Meanwhile, Spectra chief executive Greg Rizzo said in a statement that the assets will significantly expand its base into an important supply region and are consistent with the company's focus on fee-based pipeline and storage businesses.
Noark's primary asset is Ozark Gas Transmission LLC, a 565-mile, Federal Energy Regulatory Commission-regulated natural gas transmission pipeline system that extends from southeast Oklahoma through Arkansas into southeast Missouri. The system connects to several interstate pipeline systems, including Spectra's Texas Eastern Transmission system.
Noark, which generated Ebitda of $46 million last year, also owns Ozark Gas Gathering LLC, a 365-mile, fee-based natural gas gathering system in eastern Oklahoma and western Arkansas.
The deal will be immediately accretive for Spectra unitholders, Rizzo added. Based on the increased cash flow from the deal, management is recommending to its general partner's board that Spectra's quarterly cash distribution per limited partnership be boosted by 1 cent in the first full quarter after the transaction closes.
Spectra will pay for the deal with equity and borrowings from its credit facility and a bridge loan from sponsor Spectra Energy Corp. while it pursues long-term financing.
"This financing approach retains more than sufficient liquidity to fund projects currently in execution into 2010, while maintaining our strong balance sheet and investment-grade credit metrics," Rizzo said.
The deal should close in the second quarter if it receives regulatory approval.
Wachovia Securities, a unit of Wells Fargo Co., advised Spectra. UBS assisted Atlas.