Atlas Energy LP shares soared Wednesday on the company's plans to buy Teak Midstream LLC for $1 billion in cash.
THE SPARK: Atlas said Tuesday that its subsidiary Atlas Pipeline Partners LP will acquire the privately held midstream operator. Teak is a natural gas gathering and processing company with assets in the Eagle Ford shale in south Texas, a major oil and gas area in the U.S.
THE BIG PICTURE: Atlas, based in Pennsylvania, will get pipelines and several processing facilities as well as a stake in a joint venture arrangement as part of the deal. The company expects the acquisition will add $25 million to $40 million to its cash flow.
Atlas expects the deal to close in the second quarter of 2013.
THE ANALYSIS: Standard & Poor's Ratings Services affirmed its "B+" junk-grade corporate credit and unsecured debt rating on Atlas and said the outlook is stable. Credit analyst Nora Picks said the improved scale and geographic diversity that Atlas gains from the acquisition is partially mitigated by more debt.
SHARE ACTION: Atlas rose $5.04, or 11.2 percent, to $50.01 in afternoon trading. The stock hit a 52-week high of $52.31 earlier in the session.