NuStar Energy LP (NYSE: NS) will spend nearly $1.5 billion to make its entrance into the Permian Basin through an agreement to buy Navigator Energy Services LLC, NuStar said April 11.

NuStar, based in San Antonio, agreed to acquire Dallas’ Navigator, which owns and operates crude oil transportation, pipeline gathering and storage assets, including the Big Spring Gateway System, located in the Midland Basin of West Texas.

The transaction is valued at $1.475 billion, subject to closing adjustments. NuStar plans to fund a portion of a deal with a public equity offering of about 10.5 million common units.

Navigator’s website says the Big Spring Gateway pipeline has a throughput capacity of 190,000 barrels-per day (bbl/d). The Big Spring system serves producers in Martin, Glasscock, Howard and Midland counties, Texas.

“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,” Bradley C. Barron, NuStar president and CEO, said in a statement. “We expect that the purchase price, when coupled with modest future growth capex to build out the system, will result in a high single digit multiple as volumes ramp over time.”

Navigator's assets consist of:

  • About 500 miles of crude oil pipelines with about 74,000 bbl/d, ship-or-pay volume commitments;
  • Deliverability of about 412,000 bbl/d through multiple outbound interconnects;
  • Pipeline gathering system with more than 200 connected producer tank batteries capable of more than 400,000 bbl/d of pumping capacity covering more than 500,000 dedicated acres; and
  • About 1 MMbbl of crude oil storage capacity with 440,000 bbl leased to third parties.

NuStar expects the acquisition to close by May, subject to customary closing conditions, following required regulatory approvals.

Navigator is backed by a $250 million equity commitment form First Reserve Infrastructure Fund II, according to the company’s website.

NuStar currently operates about 8,700 miles of pipeline and 79 terminal and storage facilities in the U.S., Canada, Mexico, the Netherlands, St. Eustatius in the Caribbean and the U.K.

UBS Investment Bank was exclusive financial adviser to NuStar, and Andrews Kurth Kenyon is its exclusive legal adviser. Deutsche Bank Securities Inc. is exclusive financial adviser to Navigator and Simpson Thacher & Bartlett LLP is its exclusive legal adviser.

Emily Patsy can be reached at epatsy@hartenergy.com.

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