Tulsa’s NGL Energy Partners LP announced a $890 million acquisition of Mesquite Disposals Unlimited. NGL is combined all of Mesquite’s assets with NGL’s Water Solutions business.
It is considered a cash-free, debt-free basis. Under the agreement, Mesquite SWD will remain the operator of the Mesquite assets led by Mesquite’s current management team.
The assets consist of an interconnected produced water pipeline transportation and disposal system in Eddy and Lea Counties in New Mexico and Loving County, Texas…a system located in the Permian Basin.
. At closing the Mesquite system will have 35 salt water disposal wells in total, representing over 1 million barrels per day of disposal capacity expected by year-end 2019. The majority of volumes on Mesquite’s system are contracted under long-term acreage dedications and minimum volume commitments. Additionally, approximately 95% of the current system volumes are delivered via pipeline. NGL expects the funding for this acquisition to be leverage-neutral and significantly accretive to distributable cash flow per unit in fiscal 2020 and beyond.
“As we have consistently stated in the past, our water strategy is focused on consolidating, integrating and growing our position in central Reeves County, north to the Texas / New Mexico state line and throughout Lea and Eddy County. Pro forma for the Mesquite assets, NGL’s permitted disposal capacity will nearly double to over 2 million barrels per day in the Delaware Basin,” stated Mike Krimbill, NGL’s CEO. “This transaction creates the redundancy required by our producers to manage produced water by connecting a gathering system to multiple 24-inch pipelines.”
“The Mesquite acquisition makes NGL the largest water transportation and disposal company in the Delaware Basin, providing multiple transportation, disposal and recycling options to our E&P customers,” stated Doug White, NGL’s EVP Water Solutions.
NGL will issue $100 million of its 9.625% Class C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units to owners of Mesquite, who also have an option to receive six million common units at a price of $16.00 per unit at closing. Funding of the balance of the consideration is expected to be leverage-neutral to the Partnership and not include the issuance of any additional common equity.