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$364mm of Acquisitions Accretive, DOWNGRADING to NEUTRAL (from Outperform) on Valuation; Raising Estimates.

CNP paying $275mm G&P assets from MMLP: CNP announced on Tuesday (19th June) that it had agreed to purchase natural gas gathering and processing assets from Martin Midstream ( MMLP ) for $275mm. The assets are primarily located in East Texas and NW Louisiana. CNP expects the acquisition to close in 3Q:12. (more in the full report).

CNP also acquiring $89mm gathering system from Encana: CNP also snapped up the Amoruso gathering system from Encana Corp. ( ECA ). The Amoruso is a 139-mile system currently moving 200 mmcf/d of Cotton Valley/Deep Bossier gas. CNP and ECA also entered into a 15-yr agreement where CNP will gather and treat ECA's production on the Amoruso system.

Acquisition multiples rich but still accretive: MMLP stated on its conference call that the assets it sold were expected to generate $20mm of EBITDA for 2012 translating to a roughly 14x multiple. However, given the $1.7B of cash on CNP's balance sheet, the transaction is still accretive. We increased our EPS estimates by $0.03/share to $1.20 for 2012 and $0.06/share to $1.29 for 2013 and $0.07/share to $1.35 for 2014. Accretion from the transaction is offset by lower G&P margin assumptions given a weaker outlook for NGL prices.

Lowering rating to Neutral (from Outperform) on Valuation: CNP is within sniffing distance of our existing $21 TP. Absent a near-term catalyst to justify raising our TP, we are lowering our rating to Neutral. Our $21 TP implies a 14.5x P/E multiple on our $1.17/share NTM EPS est. and adds $4/share of value from CNP's true-up settlement.

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