Azure Midstream Energy, LLC has announced that Azure, Marlin Midstream Partners, and Marlin's sponsor, NuDevco Midstream Development, LLC have entered into definitive agreements that will result in Azure owning 100% of the general partner of Marlin and 90% ownership of the total outstanding incentive distribution rights in Marlin. In addition, Azure's Legacy gathering system will be contributed to Marlin for $162.5 million. NuDevco will retain all of its 10.7 million LP units, or 59.2% ownership stake, in Marlin, subject to an option granted to Azure to acquire 20% of such units from NuDevco in order to align interests and incentivize unit holder value creation.
The Legacy system consists of approximately 658 miles of high- and low-pressure gathering lines primarily under fixed-fee contracts that serve approximately 100,000 dedicated acres predominantly in the Cotton Valley formation in east Texas and northern Louisiana with access to seven major downstream markets. The Dropdown Acquisition is expected to be immediately accretive to Marlin's distributable cash flow and the cash portion of consideration is expected to be fully funded under Marlin's $225 million amended credit facility.
"This transaction advances Azure's strategic objectives of becoming part of a larger, public MLP capable of providing access to growth capital for acquisitions, and further diversifies our customer base and midstream service offerings by expanding Azure with Marlin's new and efficient processing assets within our core areas" said I.J. "Chip" Berthelot, Chief Executive Officer, President and Director of Azure. "With this combination, we have expanded the set of services offered to our customers. This enables us to capture significant synergies between the systems and maximize returns on future investments, as well as compete more effectively for bolt-on acquisitions and step-out expansions in other areas."
Image from Azure Midstream Energy