Access Midstream Acquiring Assets From Chesapeake For $2 Billion

January 2013, Vol. 240 No. 1

Oklahoma City-based Access Midstream Partners, L.P. announced Dec. 13 that it has agreed to acquire Chesapeake Midstream Operating, L.L.C., a wholly owned subsidiary of Chesapeake Midstream Development, L.L.C., from Chesapeake Energy Corp. for $2.16 billion in cash.

The acquisition provides immediate entry to gathering opportunities in key liquids-rich regions and to the processing and fractionation segments of the midstream value chain. It adds natural gas gathering and processing assets in the Eagle Ford, Utica and Niobrara liquids-rich plays and expands Access’ existing position in both the Haynesville and Marcellus dry gas plays.

Separately, Access and Chesapeake have agreed to extend Access’ exclusivity period with respect to Chesapeake’s remaining assets in the Mid-Continent region until March 1.

Following the transactions, Access will become the largest gathering and processing MLP as measured by invested capital and throughput volume and have a substantially diversified portfolio with strategic positions in virtually all of the major unconventional basins in the country. Williams’ investment alongside GIP is a strong endorsement of this market position and future growth potential.

Consistent with the Partnership’s existing portfolio of assets, the acquired assets are anchored by long-term, market-based, cost-of-service agreements with Chesapeake and other producer customers. This long-term, cost-of-service contract structure provides protections for capital, inflation and re-contracting risks resulting in highly visible and predictable cash flows.

Concurrent with the closing of the acquisition, Williams will acquire 50% of the general partner of Access and 34.5 million of Access’ subordinated limited partner units from Global Infrastructure Partners. Access says Williams’ its vast midstream experience will complement GIP’s strong strategic and financial sponsorship as Access continues to execute on its best in class business model.

GIP and Williams have entered into a subscription agreement to purchase an aggregate of up to $1.16 billion of additional limited partner interests, including $350 million of paid-in-kind equity, demonstrating their substantial commitment to Access’ long-term success. Access has concurrently obtained debt commitments to finance the balance of the purchase price. Citigroup, Barclays and UBS Investment Bank have provided commitments for a $1 billion acquisition bridge facility. Barclays and Citi acted as exclusive financial advisors to Access with respect to the acquisition and its related financings.

Terms of the CMO acquisition were unanimously approved by the Board of Directors of Access’ general partner and by the Board’s Conflicts Committee, which is comprised entirely of independent directors.

Management Comments
J. Mike Stice, Access Midstream Partners’ CEO, commented, “The acquisition of these midstream assets is a transformational opportunity for Access. Following this transaction, Access will become the largest gathering and processing MLP as measured by invested capital and throughput volume and will have a substantially diversified portfolio with a critical midstream position in the most prominent liquids-rich basins in the United States. The extension of our services into gas processing, fractionation and NGL pipelines will enhance our ability to grow and deliver additional value to our unit holders going forward.

“I know the Williams team well and am very excited to add their world-class sponsorship to Access. Our ability to leverage Williams’ deep midstream operational and development capabilities will significantly benefit our expanded operations and lead to new growth opportunities for years to come. With GIP’s continued position, we now have two great sponsors with a substantial commitment to Access and a strong belief in our assets and business model.”

Following its acquisition of Chesapeake’s remaining gathering business, growth-oriented Access will have an average throughput of approximately 3.9 Bcf/d and more than 5,800 miles of gathering pipelines and 8.7 million acres under long-term dedication.

Matthew Harris, the GIP Partner leading the transaction commented, “Access has a proven business model and an accomplished management team. We are very excited to be forming a strategic partnership with Williams and believe today’s announcements will provide a strong foundation for further growth in the years to come.”
GIP is an independent private-equity fund with more than $15 billion under management. The New York-based fund invests globally in infrastructure assets. Its investment in ACMP began in 2009.

Upon closing of these transactions, ACMP will continue to be an independent, publicly traded master limited partnership. ACMP will continue as the operator of the assets and maintain its headquarters in Oklahoma City.