DCP Midstream Partners announces acquisitions from Duke Energy Field Services
  by: OilOnline
  Tuesday, October 10, 2006

DCP Midstream Partners, LP and Duke Energy Field Services will acquire Gas Supply Resources (GSR) from DEFS for approximately $77 million in cash and partnership units. Additionally, DEFS announced it intends to contribute an additional $250 million of assets to the Partnership targeted for the second quarter of 2007.

GSR is the largest wholesale propane logistics company in the northeastern U.S., with six owned rail terminals, one leased marine terminal, access to several open-access pipeline terminals and 475,000 barrels of storage capacity. GSR's diverse propane supply portfolio, significant storage capabilities, and multiple terminal locations allow it, as a wholesaler, to provide reliable supplies during peak demand periods. These characteristics also make GSR a premier base load wholesale propane supplier in the northeastern U.S. and reduce its exposure to unfavorable weather patterns. The Partnership is also pleased to announce the expansion of GSR into the upper Midwest through the construction of a new wholesale propane pipeline terminal in Midland, Pa., expected to be completed during the fourth quarter of 2006.

"GSR's assets and business model are an excellent fit for DCP Midstream Partners," said Mike Bradley, president and CEO. "They support our objectives to acquire businesses with organic growth opportunities, diversify our asset portfolio, and provide stable and increasing cash distributions to our unitholders. While these assets will have some seasonality to earnings, the base load nature of the sales, along with our ability to tie the purchase and sales price of propane, allow us to mitigate commodity risk and generate fee- like earnings."

"We are already evaluating several organic growth projects to expand GSR's business in addition to the new Midland terminal we announced today, which is scheduled for start up in the fourth quarter," said Bradley. "The market reception to the Midland terminal has exceeded our expectations. The terminal will provide better logistics for the propane community in this region, with good transportation access, and 2.3 million gallons of total storage capability." The Midland terminal is located near Pittsburgh, Pa., and will receive propane off a third party pipeline.

The $77 million purchase price of GSR includes the cost of the Midland terminal. The acquisition is expected to add approximately $8.5 million to the Partnership's 2007 EBITDA and will be immediately accretive to unitholders on a per-unit basis. DEFS will continue to operate the GSR assets on behalf of the Partnership after the transaction closes.

The GSR transaction is expected to close during the fourth quarter of 2006, subject to standard closing conditions. The purchase price is subject to standard closing adjustments.