HOUSTON, May 28, 2020 /PRNewswire/ -- Summit Midstream
Partners, LP (NYSE: SMLP) ("SMLP" or the "Partnership") announced
today (the "Closing Date") that it has closed the previously
announced acquisition from Energy Capital Partners II LLC ("ECP"),
of (i) Summit Midstream Partners, LLC ("Summit Investments"), the
privately held company that indirectly owns SMLP's general partner,
Summit Midstream GP, LLC (the "GP"), and (ii) 5.9 million SMLP
common units owned directly by an affiliate of ECP, for
$35 million in cash plus warrants
covering up to 10 million SMLP common units (the "GP Buy-in
Transaction"). Concurrent with the closing of the GP Buy-in
Transaction, ECP loaned the full $35
million of cash proceeds to SMLP under a first-lien senior
secured credit agreement, which will bear interest at 8.0% per
annum and mature on March 31,
2021 (the "ECP Loan"). SMLP intends to utilize the
proceeds of the ECP Loan to enhance its liquidity position and for
general corporate purposes. The acquisition results in a more
simplified corporate structure whereby Summit Investments, and all
of its subsidiaries, became wholly owned subsidiaries of SMLP, and
SMLP will be governed by a board consisting of a majority of
independent directors.
Summit Investments owns 100% of Summit Midstream Partners
Holdings, LLC ("SMP Holdings"), which owns:
- 100% of the GP;
- 45.3 million SMLP common units; and
- the $180.75 million deferred
purchase price obligation ("DPPO") receivable.
SMP Holdings will continue as the borrower under
an existing $158.2 million term loan which matures in
May 2022 and is secured by
approximately 34.6 million SMLP common units owned by SMP Holdings
and the GP interest. The acquired entities, including Summit
Investments and SMP Holdings, are unrestricted subsidiaries under
SMLP's senior notes indentures, and are not guarantors or
restricted subsidiaries under SMLP's revolving credit
facility.
Following closing of the GP Buy-in Transaction, SMLP plans to
retire 16.6 million SMLP common units that represent approximately
17.5% of the total SMLP common units outstanding immediately
preceding the closing of the GP Buy-in Transaction. In
addition, the remaining 34.6 million SMLP common units that are
pledged as collateral under the SMP Holdings term loan will not be
considered "outstanding" units under the Fourth Amended and
Restated Agreement of Limited Partnership of SMLP (the "Amended
Partnership Agreement"), so long as they are held by SMLP or one of
its subsidiaries. As such, following the closing of the GP
Buy-in Transaction, the approximately 43.3 million SMLP common
units owned by SMLP's public unitholders will constitute 100%
of the outstanding SMLP common units for purposes of voting and
distributions.
Heath Deneke, President and Chief
Executive Officer, commented, "The closing of the GP Buy-in
Transaction represents a key milestone in SMLP's
transformation. Together with an independent and fully
aligned Board, SMLP's management team is focused on generating
long-term unitholder value while providing safe, reliable and
efficient service for our customers. SMLP is taking control
of its future with this transaction, which will enable it to
continue to prioritize the balance sheet by reducing debt,
controlling costs, increasing financial flexibility and improving
credit metrics in today's volatile market. This transaction
has already facilitated the suspension of our common and preferred
distributions which will result in the retention of approximately
$76 million of cash that otherwise
would have been distributed out of the business. Through its
ownership in SMP Holdings, SMLP now indirectly owns and controls
the $180.75 million DPPO receivable
which we intend to address in a manner that maximizes value for
SMLP's stakeholders. In addition, immediately following
closing of the transaction, the number of SMLP's common units
outstanding will be reduced by 54.2%, which materially increases
the equity value on a per-unit basis for our public
unitholders."
SMLP Partnership Agreement Amendment
Concurrent with the closing of the GP Buy-in Transaction, all
directors affiliated with ECP have resigned from the Board of
Directors of the GP (the "Board"). Going forward,
the Board will consist of a majority of independent directors,
thereby further aligning the interests of the Board with the
interests of SMLP's public unitholders. SMLP also
amended its partnership agreement to, among other things,
(i) provide the holders of SMLP common units with voting
rights in the election of the members of the Board on a staggered
basis beginning in 2022 and (ii) to provide for the terms of the
ECP Warrants (as defined below). Pursuant to the Amended
Partnership Agreement, effective as of immediately following the
closing of the GP Buy-in Transaction, the Board has been divided
into three classes of directors. Two Class I directors will serve
for an initial term that expires at the 2022 annual meeting, two
Class II directors will serve for an initial term that expires at
the 2023 annual meeting, and Class III directors will serve for an
initial term that expires at the 2024 annual meeting. Mr. Deneke
will serve as the Chairman of the Board and will not be subject to
public election.
Appointment of Directors to the Board
On the Closing Date, immediately following the closing of the GP
Buy-in Transaction, Robert J.
McNally and Marguerite
Woung-Chapman (the "New Directors") were unanimously
appointed by the Board to serve as members of the Board.
Along with Mr. Deneke, Lee
Jacobe, Jerry L. Peters and
Robert M. Wohleber will continue to
serve as members of the Board. Each of the New Directors and
each of Mr. Jacobe, Mr. Peters and Mr. Wohleber is an independent
director under the applicable NYSE standards. Mr. Wohleber has been
appointed as the lead independent director and will preside over
all executive sessions of the Board.
Robert J. McNally
Mr.
McNally will be a Class II director and will serve on the Audit
Committee of the Board. From 2018 through 2019, Mr. McNally served
as President and Chief Executive Officer of EQT Corporation, an
NYSE-listed independent natural gas producer with operations in
Pennsylvania, West Virginia and Ohio. Prior to that, from 2016 to 2018, Mr.
McNally served as Senior Vice President and Chief Financial Officer
of EQT Corporation. From 2010 until 2016, Mr. McNally served as
Executive Vice President and Chief Financial Officer of Precision
Drilling Corporation, a TSE and NYSE-listed drilling contractor
with operations primarily in the United
States, Canada and the
Middle East. From 2009 to 2010,
and for a period in 2007, Mr. McNally served as an Investment
Principal for Kenda Capital LLC. In 2008, Mr. McNally served as the
Chief Executive Officer of Dalbo Holdings, Inc. In 2006, Mr.
McNally served as Executive Vice President of Operations and
Finance for Warrior Energy Services Corp. From 2000 to 2005, Mr.
McNally worked in corporate finance with Simmons & Company International. Mr. McNally
began his career as an engineer with Schlumberger Limited and
served in various capacities of increasing responsibility during
his tenure from 1994 until 2000. In addition to his experience as
an executive, Mr. McNally has had extensive experience in the
boardroom, where he has served, at various times, on the boards of
Warrior Energy Services, Dalbo Holdings, EQT Midstream Partners,
EQT GP Holdings, Rice Midstream Partners and EQT Corporation. He
has a B.S. in Mechanical Engineering from University of Illinois, a B.A. in Mathematics from
Knox College, and an M.B.A. from
Tulane University Freeman School of
Business. Mr. McNally brings a wealth of executive management,
operational, and financial experience in the oil and gas industry
to the Board.
Marguerite
Woung-Chapman
Ms. Woung-Chapman will be a Class II
director and will serve as the Chairperson of the newly formed
Corporate Governance and Nominating Committee of the Board. In
2018, Ms. Woung-Chapman served as Senior Vice President, General
Counsel and Corporate Secretary of Energy XXI Gulf Coast, Inc., a
NASDAQ-listed independent exploration and production company that
was engaged in the development, exploitation and acquisition of oil
and natural gas properties in the U.S. Gulf
Coast region. Prior to that, from 2012 to 2017, Ms.
Woung-Chapman served in various capacities at EP Energy
Corporation, a private company that subsequently became an
NYSE-listed independent oil and gas exploration and production
company, including, among others, Senior Vice President, Land
Administration, General Counsel and Corporate Secretary. Ms.
Woung-Chapman began her career as a corporate attorney with El Paso
Corporation (including its predecessors) and served in various
capacities of increasing responsibility during her tenure from 1991
until 2012, including, among others, Vice President, Legal Shared
Services, Corporate Secretary and Chief Governance Officer. She has
a B.S. in Linguistics from Georgetown
University and a J.D. from the Georgetown University Law Center. Commencing on
June 1, 2020, Ms. Woung-Chapman will
also serve as the Chair of the Board of Directors and President of
the Girl Scouts of San Jacinto Council, which is the second largest
Girl Scout council in the country. Ms. Woung-Chapman has valuable
and extensive experience in all aspects of management and strategic
direction of publicly-traded energy companies and brings a unique
combination of corporate governance, regulatory, compliance, legal
and business administration experience to the Board.
Warrants
Concurrent with the closing of the GP Buy-in
Transaction, SMLP entered into (i) a warrant to purchase up to
8,059,609 Common Units with SMP Topco, LLC, an affiliate of ECP
("ECP NewCo) (the "ECP NewCo Warrant") and (ii) a warrant to
purchase up to 1,940,391 common units with SMLP Holdings, LLC, an
affiliate of ECP ("ECP Holdings") (the "ECP Holdings Warrant" and
together with the ECP NewCo Warrant, the "ECP Warrants"). The
exercise price under the ECP Warrants is $1.02 per SMLP common unit. SMLP may issue
a maximum of 10,000,000 common units under the ECP Warrants.
Upon exercise of the ECP Warrants, the proceeds to the
holders of the ECP Warrants, whether in the form of cash or common
units, will be capped at $2.00 per
Common Unit above the exercise price.
The GP Buy-in Transaction was unanimously approved by the
Conflicts Committee of the Board, which consists entirely of
independent directors. The conflicts committee engaged Tudor,
Pickering, Holt & Co. as its independent financial advisor and
Akin Gump Strauss Hauer & Feld LLP as its legal advisor.
SMLP engaged Guggenheim Securities, LLC as its financial advisor
and Baker Botts L.L.P. as its legal advisor. ECP engaged
Latham & Watkins LLP as its legal advisor.
About Summit Midstream Partners, LP
SMLP is a value-driven limited partnership focused on
developing, owning and operating midstream energy infrastructure
assets that are strategically located in unconventional resource
basins, primarily shale formations, in the continental United
States. SMLP provides natural gas, crude oil and produced
water gathering services pursuant to primarily long-term and
fee-based gathering and processing agreements with customers and
counterparties in six unconventional resource basins: (i) the
Appalachian Basin, which includes the Utica and Marcellus shale formations in
Ohio and West Virginia; (ii) the Williston Basin, which includes the Bakken and
Three Forks shale formations in North
Dakota; (iii) the Denver-Julesburg Basin, which includes the
Niobrara and Codell shale
formations in Colorado and
Wyoming; (iv) the Permian Basin,
which includes the Bone Spring and Wolfcamp formations in
New Mexico; (v) the Fort Worth Basin, which includes the Barnett
Shale formation in Texas; and (vi)
the Piceance Basin, which includes the Mesaverde formation as well
as the Mancos and Niobrara shale formations in Colorado.
SMLP has an equity investment in Double E Pipeline, LLC, which is
developing natural gas transmission infrastructure that will
provide transportation service from multiple receipt points in the
Delaware Basin to various delivery
points in and around the Waha Hub in Texas. SMLP also has an
equity investment in Ohio Gathering, which operates extensive
natural gas gathering and condensate stabilization infrastructure
in the Utica Shale in Ohio. SMLP is headquartered in
Houston, Texas.
Forward-Looking Statements
This press release includes certain statements concerning
expectations for the future that are forward-looking within the
meaning of the federal securities laws. Forward-looking
statements include, without limitation, any statement that may
project, indicate or imply future results, events, performance or
achievements and may contain the words "expect," "intend," "plan,"
"anticipate," "estimate," "believe," "will be," "will continue,"
"will likely result," and similar expressions, or future
conditional verbs such as "may," "will," "should," "would," and
"could." Forward-looking statements also contain known and
unknown risks and uncertainties (many of which are difficult
to predict and beyond management's control) that may cause
SMLP's actual results in future periods to differ materially from
anticipated or projected results. An extensive list of
specific material risks and uncertainties affecting SMLP is
contained in its 2019 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March
9, 2020, and as amended and updated from time to time. Any
forward-looking statements in this press release, are made as of
the date of this press release and SMLP undertakes no
obligation to update or revise any forward-looking statements to
reflect new information or events.
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