LNG

NuStar Energy, the US liquids terminal and pipelines operator with 9,500 miles of pipeline and 63 terminal and storage facilities, has been acquired by Sunoco LP, the motor fuels distributor, in an all-equity transaction valued at $7.3 billion including assumed debt.

The takeover of NuStar is the latest in US energy industry mergers over the past 12 months involving majors like ExxonMobil Corp. and Chevron Corp. as well as natural players like Chesapeake Energy.

The buyer Sunoco LP is a master limited partnership with core operations that include the distribution of fuel at 10,000 convenience stores, independent dealers and distributors located in more than 40 US states and the general partner owner is Dallas-based natural gas pipelines operator Energy Transfer LP.

Under the terms of the agreement, NuStar common unit-holders will receive 0.400 Sunoco common units for each NuStar common unit, implying a 24 percent premium as of January 19.

Refinancing

Sunoco said it had secured a $1.6 billion 364-day bridge term loan to refinance NuStar’s notes and revolving credit facilities and financing agreements

Under the terms, around $3.1Bln of Sunoco equity will be issued to NS unit-holders, though secondly a total of $2.6Bln of existing NS Senior Notes and GoZone Bonds will remain outstanding.

And thirdly, $1.6Bln of NS preferred equity and outstanding notes and borrowings will be refinanced.

“The transaction has been unanimously approved by the board of directors of both companies and is expected to close in the second quarter of 2024 upon the satisfaction of closing conditions, including approval by NuStar’s unit-holders and customary regulatory approvals,” said the statement on the transaction.

The companies said that the strategic rationale of the deal was that it increased stability by diversifying the business, adding scale and capturing the “benefits of vertical integration” that comes with the combination.

NuStar, headquartered in San Antonio, Texas, will bring complementary assets to the deal with the pipelines and terminals and growing renewables business as well as its Permian crude gathering system anchored by high-quality acreage and investment-grade customers.

Stable foundation

Sunoco’s main business makes it the largest US independent fuel distributor and with a “stable foundation” from long-term take-or-pay agreements with 7-Eleven stores, seven-to-10 fuel supply agreements, a real estate portfolio generating stable lease income as well as 42 fuel product terminals.

The previous US deal in an active year for mergers and acquisitions was Talos Energy, the US oil and gas company, acquiring operator QuarterNorth Energy in a $1.29Bln cash and stock deal announced on January 16 to boost its presence in the Gulf of Mexico.

It was the latest in a long list of US energy M&A moves that included several mega-deals.

Chesapeake Energy on January 12 announced a deal to buy smaller market rival Southwestern Energy.

Chesapeake’s transaction was for $7.4Bln in stock and to create a company that will be the nation’s largest natural gas producer.

Natural gas and oil

The combined Chesapeake-Southwestern company will also assume a new name at the closing of that transaction.

In earlier mega-deals, ExxonMobil in October 2023 announced the acquisition of Pioneer Natural Resources, the biggest oil producer in Texas, in a $60Bln all-stock deal.

In the same month, Chevron Corp. finalised an agreement to acquire Hess Corp. for $53Bln.

Occidental Petroleum then announced the acquisition of CrownRock for nearly $12Bln in December 2023 and in early January 2024 Houston-based APA, one of whose subsidiaries is Apache Corp., said it had agreed to acquire Callon Petroleum for $4.5Bln.

Royal Dutch Shell and Energy Transfer, the US pipeline, storage and midstream company, have signed a framework agreement for the development of their large-scale LNG export project at the existing import terminal at Lake Charles in Louisiana.

The 4.3-billion Rover Pipeline, among the largest US natural gas expansions under development and designed to deliver Marcellus and Utica shale gas to LNG ventures on the Gulf Coast and markets in the Midwest, has accused the Ohio Environmental Protection Agency of attempting to delay the project’s completion.

Mexico is seeking more long-term natural gas supplies from the US Gulf Coast in competition to expected rising demand for feed-gas from large-scale LNG liquefaction and export projects under development, with the Mexicans issuing a request for offers for long-term supplies of natural gas at a West Texas hub.

Energy Transfer Partners, the US pipeline company with LNG interests on the Gulf Coast, said it received approval from the Federal Energy Regulatory Commission to place additional phase two facilities into service on its $4.3-billion Rover Pipeline opening up Marcellus and Utica Shale production to US LNG export and domestic markets.