The Choice is Yours - PowerPoint Presentation

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The Choice is Yours

Alvarez & Marsal Taxand, LLC

Acquisitions & Dispositions, Tax Planning, Choice of EntitySlide2

Contents

Introduction

Choice of Entity – Tax Considerations

Master Limited Partnership (MLP)

Basic Structuring

Elections Under Section 338 Common Due Diligence Tax Issues Recent Deals in the Marketplace

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Layne J. Albert, a Managing Director with Alvarez & Marsal Taxand, LLC, advises clients on the federal income tax ramifications of complex business transactions. He also advises clients on tax department design and operations, including creating a tax department or managing a tax department through adversity, assistance with accounting for income taxes and Sarbanes-Oxley compliance. Mr. Albert has significant experience with IRS and state tax controversies, as well as state income and franchise tax issues.

With more than 17 years of experience, Mr. Albert has significant experience in identifying, understanding and managing federal and state tax issues related to complex business transactions, including mergers, acquisitions, dispositions, financings, recapitalizations, reorganizations and bankruptcy.  Mr. Albert has advised Boards of Directors, and has worked closely with CEOs, CFOs, private equity investors, IRS staff and investment bankers. He brings experience in the manufacturing, energy and service industries.

Prior to joining A&M, Mr. Albert was Vice President of Tax at Dynegy.  Previously, he was Vice President of Tax at Encompass Services. Mr. Albert also served as Tax Counsel for Tenneco. Additionally, he has served in the public sector roles with Ernst & Young and Chamberlain, Hrdlicka, White, Williams & Martin.

Mr. Albert earned a bachelor's degree in business administration, with a concentration in accounting, at the University of Texas at Austin. He received a juris doctor from South Texas College of Law and a master of laws degree (LL.M.) in taxation from the University of Houston. He is a Certified Public Accountant (CPA) in Texas.

700 Louisiana Street

Suite 900

Houston, TX 77002

Direct: (713) 221-3910

Mobile: (713) 302-6506E-mail: lalbert@alvarezandmarsal.com

Layne J. Albert

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Appendix I. Managing Director Biographies

Layne J. Albert

Managing DirectorSlide4

Christopher Howe

Chris Howe is a Senior Director with Alvarez & Marsal Taxand , LLC in New York. Mr. Howe has significant experience on transactional and general corporate tax matters in both the bankruptcy and non-bankruptcy setting. He brings experience in private equity, corporate tax and accounting, tax planning and tax controversy matters. His experience also includes advising financial and strategic investors on tax aspects associated with mergers and acquisitions and other transactional related matters including leveraged buyouts, reorganizations, spin-offs, cross-border financing, and cash repatriation.

Prior to joining Alvarez & Marsal, Mr. Howe was a Senior Manager with the Transaction Advisory Services practice of Ernst & Young. He is also a alumni of Deloitte & Touché and Arthur Andersen.

Mr. Howe holds both a Master’s of Science in Taxation and a Bachelor’s of Science in Business Administration from Northeastern University. He is a Certified Public Accountant (CPA) in the state of Massachusetts, and is a member of the American Institute of Certified Public Accountants (AICPA).

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Contact

Details

125 Park Avenue, 25

th

Floor

New York, NY 10017

Direct

: (212) 763-9607

E-mail: christopher.howe@alvarezandmarsal.com

A&M Professional Biographies

Christopher Howe

Senior Director

Transaction Tax

NOTE: Alvarez & Marsal employs CPA’s but is not a licensed CPA Firm Slide5

Choice of Entity – Tax ConsiderationsSlide6

Choice of Entity – Tax Considerations

Three

most common legal entities that are encountered in US

private

equity buyout transactions

:“C” corporationA traditional statutory (state law) corporation where no election has been made to treat as an “S” corporation“S” corporation

A traditional statutory (state law) corporation that, subject to certain requirements and restrictions, makes a special tax election or “S” election

LLC/partnershipA joint venture of two or more parties entered into for profitSlide7

Choice of Entity – Tax Considerations

The “C” corporation tax considerations:

The C corporation is a separate taxpaying

entity

Corporate

income is usually subject to two levels of income tax (i.e., “double taxation”)Entity level income taxShareholder level tax (dividend distributions)

Losses

and other tax attributes are retained at the corporate level and do not flow through to shareholdersThe treatment of these attributes to the corporation may be subject to limitation upon a purchase or “change in ownership”Slide8

Choice of Entity – Tax Considerations

The “S” corporation tax considerations:

Generally, not subject to entity level income tax

Entity level income, gain or loss flows through to the shareholders

Shareholders report S corporation income, gain, or loss in their personal income tax returns and adjust their tax basis in their stock accordingly

No second level of income tax on distributions of previously taxed earningsSlide9

Choice of Entity – Tax Considerations

The “S” corporation tax considerations (continued

): Eligibility requirements

Domestic corporation

Maximum number of shareholders is 100

Eligible shareholders are limited to US citizen or resident individuals, certain estates, certain trusts and ESOPsOne class of stockPrivate Equity (PE) considerationPE funds and corporations are not eligible shareholders. Thus, it is likely a corporation’s S election will terminate in most transactions. As a result, a historic S corporation will operate as a C corporation after a PE transactionSlide10

Choice of Entity – Tax Considerations

The LLC or Partnership tax considerations

:

Generally, not subject to entity level income tax

Entity level income, gain or loss flows through to the member/partner and is taxed on member/partner tax return

PE considerationsSignificant flexibility on the rights of equity interests and the types of equity holders. However, LLCs may be complex when compared to C corporations

Management incentive benefits and complexities in the use of profits interests vs. traditional corporate stock options

Single-member LLCs are generally disregarded for US federal income tax purposesSlide11

Master Limited Partnership - (MLP)Slide12

Master Limited Partnership (MLP)

What is MLP?

A publicly traded limited partnership

Unique investment that combines tax benefits of limited partnership with liquidity of common stock

Qualification for MLP status

Companies that receive 90% or more income from interest, dividends, real estate rents, gain from sale or disposition of real property, income and gain from commodities or commodity futures, and income and gain from mineral or natural resource activities

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Master Limited Partnership (MLP)

Nature of MLPs

Rather than buying shares, investors buy units of partnership commonly known as unit holders

Tend to operate in stable, slow-growing parts of energy industry

Typically grow by acquiring or constructing new pipelines and other facilities

General and Limited PartnersGeneral partner paid on a sliding scale, receiving greater share of each dollar distributed as limited partner’s cash distribution rise. Its take can reach as high as 50%, thus riskier

General partner’s sliding scale gives extra incentive to increase limited partner distribution, which has higher yield and is less risky

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Master Limited Partnership (MLP)

Benefits and Drawbacks

Tax avoidance Owners of partnership only taxed at individual level Entity level income

Attractive yield

Falls in 5%-7% range for limited and 3%-4% range for general partnership

Cash distributions exceed partnership’s taxable incomeTax complexity Larger unit holders may require investor to file tax returns in various states in which the partnership operates

May owe taxes on partnership income if units are held in tax-free account like an IRA

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Master Limited Partnership (MLP)

Recent environment

Several general partners going public New generation of E&P MLPs aiming to create cash flows by investing in oil and gas fields companies going public

Tax laws that restricted MLP by mutual funds rolling back

MLPs paying significantly higher prices to acquire assets

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Basic

StructuringSlide17

Basic Structuring - Straight Stock Purchase Example

Capital

Seller

Target

Acquisition

Newco

Cash

Buyer

Lenders

Debt

100% of stock

of Target

TargetSlide18

Basic Structuring - Straight Stock Purchase Example

Target (T) is a C-Co

Seller = individual owners of T

100% of stock is purchased for

cash

Tax consequences to BuyerNewco takes cost basis in T stock Book step-up in T net assets (purchase accounting)

No tax step-up in T assets

Tax consequences to SellerNo tax gain to TSeller receives cash and reports a capital gain equal to the difference between the proceeds and tax basis in the shares (20% federal and state individual capital gain tax rate)Slide19

Basic Structuring - Straight Stock Purchase Example

Other

issuesT’s legal identity is preserved and business

will

operate as subsidiary of acquiring company

Generally all liabilities of T (whether disclosed, undisclosed, or contingent) will remain with TTarget’s tax attributes such as NOLs and tax credits will remain with T subject to certain limitations (Sec. 382)Slide20

Basic Structuring - Stock Acquisition General

Consequences

Carryover of target’s historical tax basis in assets

Target is a “C” Corporation

Typically the preferred exit for sellers (because of one level of tax at capital gains rates)

Target’s tax attributes (e.g., NOLs) carry over post-close, subject to change-in-control limitations

Target is an “S” Corporation

May not result in significantly lower taxes to seller than asset sale (or 338(h)(10) transaction)Because an S Corporation is a flow-through entity, there are no tax attributes to carryover.

Prior C corporation attributes (e.g., NOLs) carry over post-close, subject to change-in-control limitations

Target is a “C” Corporation

Sub. Of Tax Consolidated Group

Could be preferred exit for seller, if seller’s tax basis in target stock exceeds target’s tax basis in its assets, or seller has expiring capital losses

Target’s tax attributes (e.g., NOLs) may carry over post-close (depends on seller’s NOL position), subject

to change-in-control

limitations

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Basic Structuring - Straight

Asset P

urchase

Capital

Seller

Target

Acquisition

Newco

Cash

Net assets

Liquidation

$cash

Buyer

Lenders

DebtSlide22

Basic Structuring - Straight Asset Purchase

Target (T) is a C-Co

Seller = Target C-Co

100% of assets from T

Purchase price is all cash (

can use other consideration such as debt)Tax consequences to Buyer

Book step-up in Target net assets to fair market value

Tax step-up in Target net assets to fair market valueTax consequences to Seller

T taxed on ordinary/capital gain income (40% federal and state tax rate)Seller receives cash in liquidation and has capital gain (20% federal and state individual capital gain tax rate)Slide23

Basic Structuring - Straight Asset Purchase

Step up

Tax basis

Net assets

50

Step-up

200

Annual tax amortization (15yr)

13.33

Tax rate

40%

Annual tax benefit

5.33

NPV @ 10%

40.5

Value of basis step upSlide24

Basic Structuring - Straight Asset Purchase

Other

issues

May incur considerable expense with title transfers and state transfer taxes. Contract should specify who bears these costs.

If T is a C-Co, T’s shareholders will not be taxed on a straight asset acquisition unless T distributes the sale proceeds.

T’s NOLs and other tax attributes do not carry over to acquiring company. Attributes remain with T and can offset gain on sale. If T is liquidated, unused attributes are lost.Acquiring company may “cherry pick” which T liabilities will be legally assumed. Undesired/ contingent liabilities can be left with seller.Slide25

Basic Structuring - Asset Acquisition

General Consequences

Revalues

target’s tax basis in assets to FMV

Target is a “C” Corporation

Generally undesirable for sellers; potential for double-tax on exit (at corporate and shareholder levels)

Sellers may not be adverse if target has significant NOLs to shield corporate tax gains on asset sale

Target is an “S” Corporation

Possible if legal conditions allow; sellers generally pay only one level of taxIf target (or predecessor) was a C corporation within past 10 years, some (or all) of the gains could be subject to built-in gains (“BIG”) taxes

Buyer might gross up seller for incremental taxes Target is a “C” Corporation Subsidiary Of Tax Consolidated Group

Possible if legal conditions allow; depends on, among other things, whether target has equal or higher tax basis in its assets than seller has in its target stock

Buyer might gross up seller for incremental taxes Slide26

Elections under Section 338Slide27

Elections Under Section 338 -Tax

elections to treat a Stock purchase as an Asset

acquisition

Qualified stock purchase

required

Unrelated corporate acquirer

Purchase of 80% or more of vote and valueElection made by the 15th day of 9th month beginning after the month in which the acquisition occurs

For §338(h)(10) both the buyer and seller must sign; best to include in the stock purchase agreement Slide28

T stock

Cash and/or other consideration

Actual sale of T stock ignored

for tax purposes only

Assets

Deemed taxable

sale of assets

ACQUIRER

Corporation

or

S corp S/H

TARGET

(New Co)

TARGET

(Old Co)

Deemed

liquidation

Elections Under Section 338 - Tax elections to treat a Stock purchase as an Asset acquisitionSlide29

Elections under §338(h)(10) treated as a sale of assets by the Target while it is an S corporation owned by its shareholders or a C corporation owned by its corporate parent to a new corporation (“New Target”) followed by a deemed liquidation of the target.

Gain

on asset sale is included in the final S corporation return or in the selling group’s consolidated return and gain on stock sale is ignored.

Elections Under Section 338 - Tax elections to treat a Stock purchase as an Asset acquisitionSlide30

New Target

assets get basis step-up equal to full fair market value.Generally one

level of seller tax but there can be exceptions in certain cases.

Note

§338(h)(10) works in reverse in case of losses (FMV of Target’s assets is less than tax basis then tax basis may be stepped down).

Elections Under Section 338 - Tax elections to treat a Stock purchase as an Asset acquisitionSlide31

Elections Under Section 338 - Stock Acquisitions Treated As Asset

Acquisitions

Section 338(h)(10) (Election to Treat

Stock Purchase

as Taxable Asset

Purchase) - General Requirements:Corporate

purchaser unrelated to seller(s

)Seller must be:(a) an 80% corporate subsidiary of an affiliated group of companies or

(b) an S corporationQualified Stock Purchase (“QSP”): Purchase of 80% or more of voting power and value of target’s stock (excludes certain preferred stock)

Joint election by purchaser and seller must be filed by the 15th day of 9th month following the month in which the acquisition occurs.

Section 338(h)(10) Consequences For Buyer

Tax basis step-up in target’s assets

Increase in after-tax cash flowFor Seller

May be additional taxes (federal + state) – “gross-ups

”

Complications

in rolling shareholdersSlide32

Common Due Diligence Tax IssuesSlide33

Common Due Diligence Tax Issues – Federal

Historical Exposure

In a stock acquisition, any pre-closing tax exposures will remain with the acquired entity. Moreover, where a corporation is acquired from a consolidated group, it remains severally liable under Treas. Reg. §1.1502-6 for the entire group’s federal income tax during the period in which it was a member of the group.

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Common Due Diligence Tax Issues – Federal

Audit Exams

Inquire as to whether or not entities have been audited by the IRS and whether or not there have been any waivers or extensions of any statutes of limitations with respect to federal income taxes.

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Common Due Diligence Tax Issues – Federal

Hedging

If a transaction is timely identified as a hedge for tax purposes, the character of income and deduction recognized on each element of the hedge would be ordinary. If not, any loss on the hedge may be characterized as a capital loss that may not be used to offset ordinary income.

Generally, a hedging transaction must be identified for tax purposes in a taxpayer's books and records on the date on which the taxpayer enters into the transaction in order for any loss on the transaction to be treated as ordinary. The taxpayer’s identification must also identify the items or aggregate risk being hedged within 35 days of entering the hedging transaction.

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Common Due Diligence Tax Issues – Federal

Hedging

The absence of an identification that satisfies the requirements can cause any loss on the transaction to be treated as capital. For any transaction that is clearly a hedging transaction, however, the regulations provide that any gain is ordinary whether or not identification has been made.

While Treasury Regulations may grant taxpayers relief for an “inadvertent” failure to properly identify hedging transactions, it is not clear whether such relief would be available. As a result, any losses on the hedges could be treated as capital, while any gains would be ordinary for U.S. federal income tax purposes. Capital losses can only offset capital gains of a U.S. corporation and can generally be carried back 3 years and forward 5 years.

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Common Due Diligence Tax Issues - Federal

Net operating loss limitations – “Section 382”

After an ownership change, pre-change tax loss attributes are subject to annual “Section 382 limitation”

Limitation:

Generally = FMV of T stock x long-term tax exempt rate

Downward adjustments to FMV of T stock may be requiredRedemptions and corporate contractions (LBO applicability)Certain capital contributionsCertain non-business assets

Certain controlled group members

Unused limitation is cumulativePotential increase for certain built-in gains

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Common Due Diligence Tax Issues - Federal

Net operating loss limitations – “Section 382”

Built in Gains and Built in LossesUpon ownership change, T determines whether a net unrealized built-in gain (NUBIG) or net unrealized built-in loss (NUBIL) exists in its assets

NUBIG (NUBIL) = FMV of assets minus aggregate tax basis

If NUBIG - Built-in gains (BIGs) recognized during next 60 months increase the limitation

If NUBIL - Built-in losses (BILs) including depreciation/amortization recognized during next 60 months are subject to limitationRules are complex and create inherent difficulty in identifying/computing/tracking BIGs and BILs

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Common Due Diligence Tax Issues - Federal

Tax Contingency Reserves

Standards Codification (ASC) 740, Income Taxes, (ASC 740), establishes the financial accounting and reporting standards for capturing the income tax effects from an enterprise’s current and historic activities.

FASB Interpretation No. 48 (“FIN 48”) is FASB’s formal interpretation of ASC 740 and requires an enterprise to evaluate its income tax positions based on tax laws and regulations for financial reporting purposes.

In December 2008, FASB extended the deferral of the application of FIN 48 for non-public enterprises until years beginning after December 15, 2008 (that is, until 2009 for calendar-year companies).

.

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Common Due Diligence Tax Issues - Federal

Tax Contingency Reserves

Upon adoption, corporations will recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized.

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Common Due Diligence Tax Issues - Federal

Transaction Expenses

Transaction expenses - $20 million in tax deductible items that will be realized on the date of the closing related to:

Stock option deductions - $12 million

Restricted stock grants - $2 million

Deferred financing cost on existing debt - $1 millionInvestment banking fees, advisor fees, etc. - $5 millionSeller advises that the tax benefit of these deductions should be considered in the bid price.

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Common Due Diligence Tax Issues - Federal

Transaction Expenses

What is the value of these deductions? When can the deductions be used?

Items to consider:

These

amounts will generally be considered expenses incurred on the date of closing (pre-ownership change period). The amounts will first be utilized against pre-close stub period taxable income (seller’s period and seller’s benefit).

Remaining

amount may be carried back to the previous two tax years for refunds, and/orRemaining

amount could create an NOL carryforward or add to an existing NOL carryforward which could be limited going forward.Slide43

Common Due Diligence Tax Issues - Federal

Transaction Expenses

As such

, these amounts need to be considered in the cash tax model to determine timing of actual benefit (and NPV). In the example, these amounts are added to the existing NOL but must first be reduced by 2005 pre-closing taxable income

.

Total

NOL available to carry forward to post-change year of $40 million [subject to Section 382 limitation], as follows:Slide44

Common Due Diligence Tax Issues - Federal

Limitations on deductibility of interest

Common limitations

Applicable

high yield discount obligation (“AHYDO”)

rulesCorporate acquisition indebtedness rules Disqualified interest rules - “earnings stripping”Slide45

Common Due Diligence Tax Issues - Federal

Limitations on deductibility of interest

AHYDO

Rules

Defers

tax deductions for original issue discount (“OID”), including payment in kind (“PIK”) interest, until interest is actually paid in cash if the yield-to-maturity (“YTM”) of the debenture exceeds the applicable federal rate (“AFR”) + 5%Permanently

disallows OID deductions to the extent that the YTM exceeds the AFR + 6

%ApplicationBorrower must be a C corporation. However, anti-abuse rules exist for non-corporate

issuersMaturity date must be greater than five years from date of issuanceYTM must be greater than or equal to the applicable federal rate (“AFR”) + 5%Debt must also have “significant OID”, which exists whenever, at the end of any accrual period after the fifth anniversary of issuance, the total yield accrued on the debt exceeds the total amount paid in cash by more than the issue price x YTM (i.e., the first year’s yield)Slide46

Common Due Diligence Tax Issues - Federal

Limitations on deductibility of interest

Corporate

acquisition indebtedness

rules

Disallows

interest deduction for the lesser of

:Total acquisition interest greater than $5 million in such year, orInterest for such year on tainted acquisition debt

Test is applied cumulatively to multiple acquisitionsApplicationProceeds are used to acquire at least 2/3rds of a target company Debt is issued with equity kicker or conversion feature

The debt is subordinated to trade creditors or unsecured debtD:E ratio is greater than 2:1 or interest is in excess of 1/3 of earningsSlide47

Common Due Diligence Tax Issues - Federal

Limitations on deductibility of interest

Limitation

applies to excess interest expense on debt due to a related person if no tax is imposed with respect to such interest income.

In

the case of interest paid or accrued to a partnership (or LLC) the determination is made at the partner level.

Foreign

owners, tax exempt owners, pension funds, etc.

Excess interest is interest expense in excess of adjusted taxable income. EBITDA is generally used as a proxy for adjusted taxable income. Excess interest in a given year can be carried forward. The rule does not apply if D:E does not exceed 1.5:1Slide48

Common Due Diligence Tax Issues – State and Local

Income, Franchise Taxes – Nexus Issues Related to Inventory

Inventory held in a state, even if held by a third party, may result in a nexus with the state and create a filing obligation. 

Energy companies that are transporting their product across state lines and storing it, even temporarily, in a state while in transit which may create an income/franchise, sales, and property tax filing obligation.

Pipelines

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Common Due Diligence Tax Issues – State and Local

Sales Tax - Exemption for Resale

Energy Companies that produce their energy to sell to energy providers may be entitled to an exemption from sales tax as sales for resale. 

Energy companies should ensure they are diligently collecting exemption certificates from all customers.

Specific exemptions per state

Certain states do not impose sales tax on the sale of energy, such as Massachusetts.  It is important to review the specific state law regarding the taxability of energy.

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Common Due Diligence Tax Issues – State and Local

Use Tax – Manufacturing Equipment Exemptions

Many states have an exemption from sales/use tax for manufacturing equipment and replacement parts. 

In some instances, the bulk of the equipment purchased by an energy company that produces energy may be exempt from sales/use tax. 

This exemption is particularly useful for energy companies that produce energy.

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Common Due Diligence Tax Issues – State and Local

Property Tax – Abatement Agreement Opportunities

Many municipalities are entitled to enter into agreements to abate certain taxes, such as property, for a company in exchange for established payment schedules, promises to remain for a set period of time, and/or promises to hire and maintain employment of a certain number of municipal residents. 

Energy companies may be able to leverage their production of energy to the area and stable, high-tech job market to the municipalities.

Payroll Tax – Fringe Benefits

As a general rule for all industries, auto allowances, in excess of the amount used solely for work, must be included on an employee’s W-2. 

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Common Due Diligence Tax Issues – International

International Considerations

Regional

allocation of EBITDA and other cash flow items is necessary to quantify taxes

.

Capital structure will have a significant impact on

taxes

In the case of interest paid or accrued to a partnership (or LLC) the determination is made at the partner level. In a US Holdco structure, US limitations on foreign tax credit utilization can result in double taxation

.Placement of debt in the regions generating significant cash flows will often reduce tax inefficiencies.External debtInternal debt pushdownsBeware

of trapped losses that do not provide a current tax benefit.Interest expense

Deductible expenses resulting from change of control (e.g., options and debt “make whole” fees)Slide53

Common Due Diligence Tax Issues - Compensation & Benefits

Section 280G

Section 280G generally provides that if certain payments in the nature of compensation paid to a “disqualified individual” equal or exceed three times the individual’s “base amount”(“parachute payments”), then all amounts paid in excess of one times the base amount are nondeductible to the employer (the “excess parachute payment”).

The base amount is the average of the individual’s W-2 Box 1 compensation for the five years preceding the year in which the change in control occurs.

20% excise tax on the recipient of any “excess parachute payment,” which is in addition to normal withholding tax and income tax and is also non-deductible.

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Recent Deals in the Marketplace Slide55

Recent Deals in the Marketplace

1/2008: Continental Energy Corporation purchase of natural gas operations of PNM Resources ($620 million in cash)

4/2008: Hoosier Energy REC, Inc. purchase of Holland Energy LLC ($383 million) 1/2009: Natural Gas Partners Midstream & Resources LP purchase of 40% interests in MarkWest Liberty Midstream ($200 million in cash)

2/2009: Denbury Resources Inc. purchase of Hastings Complex (oil field) from Venoco Inc. ($201 million)

2/2009: Valero Renewable Fuels Company LLC purchase of 5 production facilities and a development site of Valero Energy Corporation ($477 million--$280 million in cash)

2/2009: GE Capital and Alinda Capital purchase of Regency Intrastate Gas ($653 million)

3/2009: NRG Energy Inc. purchase of Reliant Energy Retail Services LLC ($288 million)

3/2009: First Solar Inc. purchase of solar project development business from OptiSolar Inc. ($400 million in equity) 3/2009: Agstar Financial Services ACA purchase of VeraSun Energy Corporation ($319 million)

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Recent Deals in the Marketplace

4/2009: Spectra Energy Partners purchase of NOARK Pipeline System LP from Atlas ($300 million in cash)

4/2009: Atlas America Inc. purchase of Atlas Energy Resources LLC ($1,419 million)5/2009: Talon Oil & Gas LLC purchase of 60% stake in Barnett Shale natural gas assets of Denbury Resources Inc. ($270 million)

5/2009: TC PipeLines purchase of North Baja Pipeline ($391 million)

6/2009: Cameron International purchase of NATCO Group ($728 million)

6/2009: HLND MergerCo LLC purchase of Hiland Partners LP ($304 million)6/2009: Indigo Minerals LLC purchase of Chesapeake Energy ($218 million)

6/2009: Magellan Midstream Partners L.P. purchase of Longhorn Partners Pipeline L.P. ($350 million)

6/2009: Enterprise Products LP purchase of TEPPCO Partners LP ($6 billion – but may be too downstream)6/2009: Encore Operating L.P. purchase of EXCO Resources Inc. ($375 million)

6/2009: TCW Energy & Infrastructure Group purchase of Pinon Gathering Company LLC ($200 million in cash) 55Slide57

Recent Deals in the Marketplace

6/2009: Abraxas Petroleum Corporation purchase of Abraxas Energy Partners LP ($202 million)

7/2009: Targa Resources Partners LP purchase of Downstream Business of Targa Resources Inc. ($530 million) 8/2009: Pride International purchase of Seahawk Drilling ($296 million)

8/2009: LS Power Group purchase of five peaking and three combined-cycle generation assets from Dynegy Inc. ($1,498 million)

8/2009: Williams Companies Inc. purchase of Piceance Valley of Western Colorado ($258 million)

8/2009: Kinder Morgan Energy Partners L.P. purchase of natural gas treating business of Crosstex Energy L.P. ($266 million) 9/2009: Quanta Services purchase of Price Gregory Services ($350 million in cash and equity)

9/2009: Apollo Management LP purchase of Parallel Petroleum Corporation ($483million)

9/2009: Global Infrastructure purchase of 50% stake in Chesapeake Midstream ($588 million)9/2009: Sheridan Holding Company I LLC purchase of natural gas producing assets from EXCO Resources Inc. ($540 million)

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Recent Deals in the Marketplace

10/2009: MEMC Electronic Materials Inc. purchase of SunEdison LLC ($289 million)

11/2009: Denbury Resources purchase of Encore Acquisition Co. ($4 billion – but not sure how much gas v. oil)12/2009: Mariner Energy Inc. purchase of substantially all assets of Edge Petroleum Corporation ($215 million)

1/2010: Newfield Exploration Company purchase of 350,000 gross acres from TXCO Resources Inc. ($217 million)

2/2010: Western Gas Partners LP purchase of midstream assets from Anadarko ($254 million)

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