Southern Union to Install Amine Treating Plant

Southern Union Company (SUG) has entered into a contract to install a 350- gallon per minute amine treating plant from BFX Equity Partners LLC. The plant would be installed in Southern Union Gas Services’ facility in southeastern New Mexico. Work on the installation is expected to be completed in October 2011. The amine treating plant will remove Hydrogen sulfide and carbon dioxide from natural gas and liquid hydrocarbon streams through absorption and chemical reaction.

Southern Union Gas Services is a division of Southern Union Company. Southern Union, headquartered in Houston, is one of U.S.'s leading diversified natural gas companies, engaged primarily in the transportation, storage, gathering, processing and distribution of natural gas.

The company owns and operates one of the nation's largest natural gas pipeline systems with more than 20,000 miles of gathering and transportation pipelines and one of North America's largest liquefied natural gas import terminals, along with serving more than half a million natural gas end-user customers in Missouri and Massachusetts. 

Formed in 2007, BFX Equity Partners, LLC is a Dallas-based team of oil and gas professionals specializing in fabrication, midstream and process design, construction and operations. BFX is a single source for all oil and natural gas activities including manufacturing, refurbishing, gathering, treating, processing, transportation and plant acquisition.

Southern Union Company owns one of the largest interstate pipeline networks in the U.S. and one of the largest LNG import terminals in North America. With substantial infrastructure already in place and a disciplined commitment to growth, SUG is well positioned to continue providing vital midstream services for its Permian Basin customers.

In July 2011, Southern Union entered into an amended and restated merger agreement with Energy Transfer Equity, L.P. (ETE - Snapshot Report) under which the latter will acquire Southern Union. The deal was revised following a bidding war with The Williams Companies Inc. (WMB - Analyst Report) and now stands at $9.4 billion, including $5.7 billion in cash and Energy Transfer common units. The merger is expected to close in the first quarter of 2012, subject to stockholder approval and regulatory approvals.

However, valuation continues to be restrained by the company’s dependence on outside funds for its expansion programs, as well as seasonality in its pipeline business. The company presently retains a short-term Zacks #2 Rank (Buy). We have a long-term Neutral recommendation on the stock.

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