Midstream Acquisitions and Mergers Abound Since February

Researched by Industrial Info Resources (Sugar Land, Texas)--When oil prices are low, it is not uncommon to see larger, healthier enterprises buy out smaller ones that are failing or underperforming. However, in the past four months alone, there have been several closed and agreed-upon acquisition or merger agreements between healthy midstream companies in similar weight classes.

These mergers and acquisitions represent hundreds of millions of dollars in transactions, and greatly expand the holdings of their surviving entities. One of the most active companies is Energy Transfer Partners LP (NYSE:ETP) (ETP) (Dallas, Texas), which has acquired Regency Energy Partners (Dallas, Texas) via a merger with an ETP subsidiary, and even proposed to acquire Williams Companies Incorporated (NYSE:WMB) (Tulsa, Oklahoma).

While the merger with Williams has not been accepted and remains uncertain, other midstream companies, such as Enterprise Products Partners LP (NYSE:EPD) (Houston) and Kinder Morgan Incorporated (NYSE:KMI) (Houston), have completed asset acquisitions and company acquisitions, respectively, within the past four months.

Enterprise has bought Eagle Ford pipeline and processing company EFS Midstream LLC (Irving, Texas) from Pioneer Natural Resources Company (NYSE:PXD) (Irving, Texas) and Reliance Industries Limited (LSE:RIGD) (Mumbai, India) for $2.15 billion. The acquisition gives Enterprise access to more condensate stabilizers with which to feed its export activities, which recently were sanctioned by the U.S. government.

Kinder Morgan began the trend in February with its acquisition of Hiland Partners (Enid, Oklahoma). The $3 billion deal included Hiland's groundbreaking Double H Pipeline, which connects the Bakken Shale to Guernsey, Wyoming. This path had not been successfully exploited before Double H was developed, and enables producers in the Bakken to ship their crude via pipeline to Cushing, Oklahoma, for transport to the Gulf Coast, Midwest, or, upon completion of Plains All American Pipeline LP's (NYSE:PAA) (PAA) (Houston, Texas) Diamond Pipeline, to Memphis, Tennessee .

The largest acquisition/merger, however, is by two relative giants in the oil and gas industries: Royal Dutch Shell plc (NYSE:RDSA) (The Hague, Netherlands) and BG Group plc (LSE:BG) (Reading, England). Shell plans to acquire BG for $70 billion, which would strengthen and expand its liquefied natural gas (LNG) shipping business. With Big 6 oil companies' profit margins slimming, Shell being no exception, seeking to expand its market presence in the face of so many smaller competitors is an understandable move.

The resulting impact of such a titanic merger has spelt delays for the Westcoast Connector natural gas pipeline project, in which BG owns a 50% stake. (The other 50% belongs to Spectra Energy Corporation (NYSE:SE) (Houston), which is building the line.) Since the announcement of the proposed merger, the Westcoast Connector has had its construction start delayed by more than a year.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.