Niska Gas Storage explores sale as North American market weakens

By MATTHEW MONKS
Bloomberg

Niska Gas Storage Partners, the natural gas-storage company that’s seen its market value wiped out as energy prices tumbled, is exploring a sale, people with knowledge of the matter said.

Niska, controlled by private equity funds Riverstone Holdings and Carlyle Group, is working with Evercore Partners to find a buyer, said the people, who asked not to be identified because the matter isn’t public.

The sale is part of a broader restructuring effort that’s come as Niska struggles to revive its prospects amid a natural gas glut. In February, the company ceased distributions to shareholders to preserve cash.

Niska is one of many small companies in the energy industry, from explorers to oil-services providers, that have struggled as oil prices essentially halved since June. Companies are slashing spending, suspending projects, and laying off workers to preserve cash -- while they look for investors still willing to bet on a recovery.

Niska stores gas for energy producers, investors, and power companies that want to hold onto it until cold weather or other factors push up demand -- and prices. The problem for Niska: a surge in gas production on the East Coast of the US and elsewhere means customers aren’t stockpiling as much gas as they used to.

Niska’s market value has fallen from as high as $1.3 billion last May to just $75 million at the close of trading Tuesday. Any buyer would also have to absorb nearly $827 million in debt, data compiled by Bloomberg show.

A spokeswoman for Niska declined to comment. Representatives for Evercore and Riverstone did not return phone calls seeking comment. A spokesman for Carlyle Group referred questions to Riverstone.

Niska, which describes itself as the largest independent provider of natural gas storage in North America, reported a loss of $260 million in the quarter ended Dec. 31, compared with $13.3 million a year earlier.

Boardwalk Pipeline Partners and Crestwood Midstream Partners, which also provide gas-storage services, have also struggled, but they are less vulnerable than Niska because they are more diversified.

Riverstone and Carlyle control about 54% of Niska’s outstanding shares, according to data compiled by Bloomberg. They acquired the business from Canadian oil and gas company Encana for about $1.5 billion in 2006, data compiled by Bloomberg show.

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