Investors appeared to like the idea of OGE Energy Corp. and CenterPoint Energy Inc. joining their pipeline businesses, as the shares of both companies rose sharply Friday.
OGE and CenterPoint Energy, along with ArcLight Capital Partners LLC, plan an $11 billion master limited partnership that would combine OGE's Enogex LLC pipeline and gas processing division with the pipeline assets of Houston-based CenterPoint Energy.
OGE shares rose 10 percent to a five-year high, closing at $67.63 on Friday. CenterPoint Energy shares increased 7 percent to $23.41.
Executives at OGE and CenterPoint had been looking at creating their own master limited partnerships, but eventually decided a combined effort would be more attractive to their shareholders. Master limited partnerships don't pay corporate income taxes, freeing up more cash for distribution to unit holders, who are responsible for the taxes.
“This partnership should be much stronger and more competitive than either company could have achieved on a stand-alone basis,” David McClanahan, president and CEO of CenterPoint Energy, said in a conference call Friday. “The industrial logic of putting these two businesses together is strong. We have complementary skill sets, capabilities and assets. Together, we will have greater scale, geographic reach, diversification and service capabilities, and expect to realize operating and commercial synergies.”
The combined pipeline assets and processing plants will include areas in natural gas and liquids plays in Oklahoma, Texas, Arkansas and Louisiana.
The deal is expected to close in the second or third quarter of 2013. It needs regulatory approval, including an antitrust review by the federal government under the Hart-Scott-Rodino Act.
“Together, we share a vision of creating one of the country's premier midstream companies, with a common investment object of creating value for all of our stakeholders: our customers, our employees, our shareholders and the communities where we do business,” said Pete Delaney, OGE's chairman and CEO.
The partnership's name and the location of its headquarters are expected to be revealed before the transaction closes. Its management team will be announced after regulatory approvals.