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Gas prices appear on a Sunoco station sign in Wilmington, N.C. on Monday.
Tuesday May 1, 2012

NEW YORK (AP) -- Energy Transfer Partners is buying Sunoco in a $5.3 billion deal that creates one of the more diverse pipeline companies in the country.

The acquisition includes nearly 8,000 miles of pipeline, as well as 4,900 gas stations in 24 Eastern states. Those stations will keep the iconic Sunoco brand name and its diamond-and-arrow logo. The deal also brings a refinery business that Sunoco is trying to get out of.

Energy Transfer is primarily a natural gas pipeline company. Sunoco’s pipeline network will allow the Dallas company to expand into moving crude oil and refined petroleum products from the Great Lakes and Northeast to America’s refining center along the Gulf Coast. Sunoco’s pipelines have been in high demand recently thanks to a boom in drilling for gas and oil in U.S. shale rock formations.

The agreement works out to $50.13 per Sunoco share. Those shares surged $7.99, nearly 20 percent, to a four-year high of $48.90 in midday trading.

Energy Transfer Chairman and CEO Kelcy Warren said the company has been looking to diversify into oil pipelines in response to an expected slowdown in the natural gas pipeline business. Natural gas prices are at 10-year lows, and some oil and gas production companies have been taking natural gas operations offline. Many have shifted to drilling for more domestic crude oil, which is both cheaper and of a higher quality than imported crudes.


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"We needed to be more involved in the movement of crude," Warren said in a conference call.

Pipeline companies make money by charging fees to transport oil, natural gas, and other fuels around the country. When supplies grow and storage facilities fill up -- as is the case with U.S. natural gas -- there’s less of a need to transport the fuel, and that means lower revenue for the pipeline company.

By expanding its offerings to crude and other fuels, Energy Transfer can enter different markets where there still is a lot of demand. "There’s a genuine business sense here," said Robert McFadden, a Houston-based natural gas pipeline consultant. "They’re diversifying their ability to make money."