Harvest Partners

Regency Energy Partners, LP

• Business

  Regency Energy Partners, LP (“Regency”, NYSE: RGP) was a publicly traded master limited partnership (“MLP”) midstream natural gas services company based in Dallas, TX. The company was engaged in the gathering and processing, contract compression and transportation, fractionation and storage of natural gas and natural gas liquids with assets primarily located in Arkansas, Kansas, Louisiana, Oklahoma and Texas. Regency’s general partner was majority owned by Energy Transfer Equity, L.P. (“ETE”, NYSE: ETE).

• Situation

  In 2008, Harvest targeted the midstream energy sector for investment to capitalize on a secular shift toward shale oil and gas development resulting from changes in drilling technology. Harvest engaged consultants to validate its thesis and further develop its understanding of long-term demand drivers and infrastructure needs in the midstream energy sector. At the same time, due to difficult financial market conditions, businesses structured as MLPs within the sector had limited access to financing. Without access to the public debt and equity markets, these companies began turning to private capital sources, which presented an opportunity for Harvest.

• Harvest Partners Investment

  In September 2009, Harvest made a capital investment in Regency’s Series A Convertible Preferred Units to fund certain growth projects. Harvest converted preferred units to common units of Regency and sold shares in the open market with a final exit in September 2013.

• Investment Thesis

  • Fee-based, recurring revenue stream
  • High growth operating regions
  • Substantial accretive growth opportunities
  • Positive industry outlook and high entry barriers
  • Seniority in the capital structure with attractive cash yield

• Outcome

  • Converted preferred units to common units and sold shares in the open market with a final exit in September 2013.