Business Context and Reporting Period
This Form 8-K filing by NGL Energy Partners LP (the "Partnership") reports a material event occurring on December 12, 2011, with the report filed on December 16, 2011. The Partnership entered into Contribution and Sale Agreements to acquire substantially all assets comprising the propane operations of Pacer Propane Holding, L.P. and its affiliates ("Pacer Propane"). Pacer Propane operates in Colorado, Illinois, Mississippi, Oregon, Utah, and Washington.
Key Financial Metrics
The filing details the consideration for the acquisition but does not provide the Partnership's current revenue, profit, cash flow, margins, debt, or liquidity metrics.
- Acquisition Consideration: Approximately $30.5 million in cash (subject to adjustment).
- Equity Issuance: 1.5 million common units representing limited partnership interests.
- Working Capital: A working capital payment for specified items may be payable by either party, subject to the final agreement terms.
Material Changes Versus Prior Period
This filing represents a discrete corporate event rather than a periodic financial update. The material change is the agreement to expand the Partnership's propane marketing footprint through the acquisition of Pacer Propane's assets. Upon consummation, Pacer Propane is expected to hold an approximate 5% limited partner interest in the Partnership.
Guidance, Outlook, and Risks
Outlook and Closing: The transactions are expected to close in January 2012. Closing is subject to customary conditions, including the performance of material covenants, accuracy of representations and warranties, and obtaining material consents and approvals.
Registration Rights: The Partnership will amend its existing registration rights agreement to grant certain registration rights for the common units issued to Pacer Propane.
Risks and Contingencies: The filing notes that the Contribution Agreements contain representations and warranties qualified by related schedules and should not be relied upon as a complete description of the parties' state of affairs. The full text of the agreements will be filed as exhibits to a later SEC filing.
Investor Verification Checklist
- Verify the final closing date in January 2012 and confirmation that all customary conditions were satisfied.
- Review the full text of the Contribution Agreements (to be filed later) for specific working capital adjustments and final cash consideration.
- Confirm the exact percentage of limited partner interest held by Pacer Propane post-closing based on the final unit count.
- Assess the impact of the $30.5 million cash outlay on the Partnership's liquidity and debt covenants.