DCP Midstream And DCP Midstream Partners Merge

(RTTNews) - DCP Midstream, LLC or Midstream, a 50/50 joint venture between Phillips 66 and Spectra Energy or Owners, and DCP Midstream Partners, LP (DPM), announced that they have signed and closed a transaction combining all of the assets and debt of DCP Midstream with DPM, simplifying the corporate structure and creating the largest natural gas liquids or NGL producer and gas processor in the United States.

On January 23, 2017, the combined company will be renamed DCP Midstream, LP and the New York Stock Exchange stock ticker symbol will be changed to "DCP".

As per terms of the Transaction, Midstream has contributed subsidiaries owning all of its assets to DPM, plus $424 million of cash, in exchange for approximately 31.1 million DPM units ($1.125 billion) and DPM assuming $3.15 billion of Midstream debt, for an estimated transaction multiple of approximately eight times based on current commodity strip prices.

The cash proceeds of $424 million contributed to DPM will be used to repay its revolver, fund its growth projects or prefund repayment of DPM debt maturing in December 2017.

The Owners have retained their 50/50 joint ownership of DCP Midstream, LLC, which owns the incentive distribution rights (IDRs) and 38 percent of the outstanding DPM general and limited partner units. The terms of the Transaction were unanimously approved by the Board of Directors of DCP Midstream and DCP Midstream Partners based on the unanimous approval and recommendation of the Conflicts Committee, which is comprised of independent directors.

The Transaction is projected to be distributable cash flow (DCF) accretive to DPM unitholders at current strip prices.

The Transaction increases Phillips 66 and Spectra Energy's ownership in DPM to 38 percent allowing owners greater participation in increased earnings from future growth opportunities at the MLP. To support a minimum 1.0 times distribution coverage ratio, the Owners have agreed, if required, to provide IDR givebacks up to $100 million annually through 2019 which provides downside protection for LP unitholders.

DPM will construct a new 200 MMcf/d cryogenic natural gas processing plant (Mewbourn 3) in the DJ Basin, its tenth plant in the basin, projected to be in service by the end of 2018. Additionally, DCP collaborated with several key producers to form a cooperative development plan which provides a framework to add another 200 MMcf/d plant by mid-2019. Together, these projects will increase capacity by 50 percent to 1.2 billion cubic feet per day to support growing processing needs of producers. DPM will also complete the next phase of its Grand Parkway low pressure gathering project and associated compression expansions by the end of 2018.

DPM is in the process of constructing additional field compression and plant bypass infrastructure that will add approximately 40 MMcf/d of incremental capacity during the summer of 2017. The new plants will connect to the Front Range Pipeline, one-third owned by DPM, for NGL takeaway to Mont Belvieu, Texas. Total capital investment for the plant and associated gathering is expected to be up to $395 million.

DPM will expand NGL takeaway capacity on Sand Hills Pipeline by 30 percent, or 85,000 barrels per day (BPD) to 365,000 BPD, through the addition of four pump stations and a pipeline loop (Sand Hills expansion) to meet NGL production growth from owned and third party plants in the Delaware Basin.

Total capital investment for the Sand Hills expansion is approximately $70 million, with an expected in-service date in the fourth quarter of 2017. The newly combined DPM owns two-thirds interest in Sand Hills and Phillips 66 Partners owns the remaining one-third interest and each will fund their proportionate share of the expansion.