"It makes sense for SemGroup to to bring its former corporate entity back inside," said Jake Dollarhide, president of Longbow Asset Management Co. in Tulsa. "There's obviously a cost savings. Now they're paying for two auditing firms, two legal departments and two finance departments."
While energy companies spent several years spinning off their midstream assets into master limited partnerships, Dollarhide said he expects more companies now to follow SemGroup's lead and buy back their pipeline and storage properties.
"In this energy environment, the longest bear market we've seen in at least 30 years, I think we will see more of these type transactions aimed at companies investing in themselves," Dollarhide said. "For SemGroup, I think this is a poison pill. It makes it more difficult to be acquired. It makes it more expensive to be taken out."
National pipeline company Kinder Morgan two years ago began buying back its master limited partnerships. Tulsa-based Williams Cos. Inc. announced plans to buy back Williams Partners LP before that effort was sidelined when Dallas-based Energy Transfer Equity offered to buy Williams.