Sanchez Production Partners completes midstream acquisition

Sanchez Production Partners LP has announced that it has closed its previously announced acquisition of pipeline, gathering and compression assets located in Western Catarina, in the Eagle Ford Shale in South Texas, from Sanchez Energy Corporation SN, +2.28%.

As a result of the Western Catarina Midstream Transaction, the Partnership's management intends to recommend that the board of directors of its general partner approve a plan to begin distributions at an initial annualised rate of US$1.60 per unit. Subject to approval of the plan at the board's next regularly scheduled meeting, the Partnership anticipates that a distribution of US$0.40 per unit will be paid in November 2015 for the third quarter 2015. The Partnership expects to provide further distribution guidance and updates on plans for growth along with its third quarter 2015 earnings release in November 2015.

"We see exciting times ahead for the Partnership," said Gerry Willinger, Interim CEO of the general partner of SPP. "We believe the Western Catarina Midstream Transaction results in a balance sheet and distribution metrics that provide a solid base for future growth. Our ability to execute the transaction under challenging conditions is a testament to the team we have assembled at the Partnership and the support we currently see for our strategic plan and path forward. In today's challenging energy market environment, we believe that the Partnership is well positioned to capitalise on new opportunities stemming from organic growth and the acquisition activity that we anticipate will increase as market conditions evolve."

Acquisition Financing

In conjunction with the Western Catarina Midstream Transaction, the partnership completed its previously announced sale of Class B Preferred Units to Stonepeak Infrastructure Partners, a private equity firm that focuses on the infrastructure space. The Partnership also completed amendments to its US$500 million credit facility. Pursuant to those amendments, the borrowing base under the credit facility increased from US$110 million to US$200 million, excluding the value of the Partnership's Oklahoma and Kansas assets. SPP currently has US$106 million in debt outstanding under the credit facility, which matures in March 2020. As a result of the amendments and lower utilisation of the borrowing base, the interest rate paid by the Partnership on the debt outstanding decreased by 0.50%.

"We are very pleased with the strong support received in conjunction with the Partnership's financing of the Western Catarina Midstream Transaction," added Mr. Willinger. "With bank commitments that exceeded our expectations, the amended credit facility and larger bank group provides the borrowing capacity, hedge capabilities, and bank support needed to quickly respond to the opportunities we see in the marketplace. We look forward to working with our bank group as we grow the Partnership over time."

Management Update

In connection with the issuance of the Class B Preferred Units, Stonepeak has received two seats on the board of directors of SPP's general partner and has appointed Luke Taylor and Jack Howell to fill those seats.

Mr. Taylor is a Senior Managing Director with Stonepeak. He has been investing in infrastructure for over 14 years, sits on the board of Paradigm Energy Partners, Casper Crude to Rail Holdings, and Energizing Co., and is a former director of Orion Holdings and Northstar Renewable Power. Prior to joining Stonepeak, Mr. Taylor was a Senior Vice President with Macquarie Capital based in New York.

Mr. Howell is a Principal with Stonepeak. Prior to joining Stonepeak, he covered the oil and gas sector for Davidson Kempner, a hedge fund that focuses on distressed investments. Prior to Davidson Kempner, Mr. Howell worked for Denham Capital, an energy-focused private equity firm. Mr. Howell started his career in Credit Suisse's oil and gas investment banking group.

Edited from press release by Angharad Lock

Read the article online at: https://www.worldpipelines.com/business-news/15102015/sanchez-production-partners-completes-midstream-acquisition-1610/