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NuStar to Acquire Navigator Energy and Enter the Permian Basin

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NuStar Energy to acquire Navigator Energy

On Wednesday, April 12, 2017, NuStar Energy (NS) announced that it will acquire Permian-focused Navigator Energy Services for ~$1.5 billion. With the acquisition, NuStar will enter the prolific Permian Basin. The deal received a negative reaction, and the stock fell 7.9%. We’ll look at the reason for this negative reaction in the next part of this series.

NuStar plans to finance the deal with equity and debt. It’s expecting to close the acquisition by the end of the second quarter of 2017.

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The Permian Basin continues to have strong drilling activity and robust production growth. Some of the major deals in the region in 2017 include Plains All American Pipeline’s (PAA) $1.2 billion acquisition of Alpha Crude Connector, Targa Resources’ (TRGP) $1.5 billion acquisition of Outrigger Energy, and the asset swap transaction between Williams Partners (WPZ) and Western Gas Partners (WES).

Navigator Energy’s assets

Navigator Energy Services is involved in crude oil gathering, transportation, and storage, primarily in the Midland basin of the Permian Basin. Its assets include the following:

  • 500 miles of crude oil pipeline with a total deliverable capacity of 412,000 bpd (barrels per day), tied to MVCs (minimum volume commitments) of 74,000 bpd
  • gathering system covering more than 500,000 dedicated acres
  • 1.0 million barrels of crude oil storage
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Management commentary

According to Bradley Barron, NuStar Energy’s president and CEO (chief executive officer), “We are excited about starting 2017 with a strategic acquisition, and the addition of Navigator’s Permian assets marks NuStar’s entry into one of the most prolific basins in the United States.”

Series overview

In this series, we’ll analyze the NuStar Energy deal with Navigator Energy Services from various perspectives. We’ll look at the reaction of NuStar stock to the acquisition announcement and Navigator’s Permian presence. Finally, we’ll look at NuStar’s leverage position, valuations, and analyst ratings.

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