Business Context and Reporting Period
This Form 8-K Current Report, filed on November 4, 2011, covers events occurring on November 1, 2011, for NGL Energy Partners LP (the "Partnership"). The filing documents the completion of a previously announced transaction with SemStream, L.P., the natural gas liquids division of SemGroup Corporation.
Key Financial Metrics and Transaction Details
The filing details a material acquisition rather than providing standard periodic financial statements (revenue, profit, or cash flow). Key transaction metrics include:
- Consideration Paid: $93,054,011.04 in cash.
- Equity Issued: 8,932,031 Common Units representing limited partnership interests.
- Assets Acquired: Substantially all assets of SemStream, excluding SemStream Arizona Propane, L.L.C.
- Working Capital: A post-closing adjustment mechanism is in place for specified items, payable to either party.
- General Partner Interest: SemStream acquired a 7.5% interest in the Partnership's General Partner in exchange for a cash contribution.
Material Changes Versus Prior Period
This filing represents a significant structural change to the Partnership's asset base and capital structure:
- Asset Expansion: The Partnership has expanded its natural gas liquids portfolio through the acquisition of SemStream's assets.
- Capital Structure: The issuance of nearly 9 million new Common Units increases the outstanding unit count.
- Dividend Policy Impact: SemStream waived ordinary course cash distributions on 3,932,031 of the newly issued Common Units until August 30, 2012.
- Corporate Governance: The board of directors of the General Partner was expanded from six to eight members, with two new directors appointed by SemStream.
Guidance, Outlook, and Agreements
The filing outlines several new contractual arrangements and governance changes:
- Registration Rights: An amendment to the Registration Rights Agreement increased the total number of permitted demand registrations from four to six.
- Board Representation: SemStream secured the right to appoint two directors to the General Partner's board.
- Financial Reporting: The Partnership will file financial statements of the business acquired and pro forma financial information within 71 calendar days of this filing.
- Unregistered Sales: The Common Units were issued in a private transaction exempt from registration under Section 4(2) of the Securities Act of 1933.
Investor Verification Checklist
- Verify the final post-closing working capital adjustment amount, as it may alter the total consideration paid.
- Review the upcoming pro forma financial information (due within 71 days) to assess the impact of the acquisition on diluted earnings and cash flow.
- Confirm the specific cash contribution amount SemStream made to acquire the 7.5% General Partner interest.
- Monitor the waiver of distributions on 3,932,031 units and its effect on the Partnership's distributable cash flow until August 2012.
- Examine the full text of the Contribution Agreement (Exhibit 2.1) for representations, warranties, and risk allocation details not summarized in this report.