Sunoco acquisition of Vitol’s Permian assets expands the company’s midstream infrastructure at the premier plays in the country
Netherlands-based energy trader Vitol Group announced last week that its partner in its Permian Basin crude oil system, Pennsylvania-based MLP Sunoco Logistics (ticker: SXL) will purchase an integrated crude oil business in West Texas for approximately $760 million plus working capital.
The deal will provide Sunoco with approximately 2 MMBO of crude terminal capacity in Midland, Texas, a crude oil gathering and mainline pipeline system in the Midland Basin including a significant acreage dedication from an investment grade Permian producer, and crude oil inventories related to Vitol’s crude oil purchasing and marketing business in West Texas, the company said in a press release.
The acquisition includes the purchase of a 50% interest in SunVit Pipeline LLC which results in Sunoco owning all of the membership interests in SunVit. SunVit connects the Midland terminal to the partnership’s Permian Express 2 pipeline, a takeaway to bring Permian crude oil to multiple markets.
Sunoco’s owners, Energy Transfer Partners (ticker: ETP) and Energy Transfer Equity (ticker: ETE) have agreed to reduce the incentive distributions the general partner receives from the Partnership by a total of $60 million over a two-year period. The reduction will be recognized evenly over eight quarters beginning with the quarterly cash distribution paid for the third quarter 2016, the company said.
“The addition of the Vitol system is an excellent synergistic fit to our growing crude platform in the Permian Basin,” Michael Hennigan, president and CEO of Sunoco Logistics, said in the company’s statement. “The Permian Basin is the most prolific of all of the U.S. shale areas with strong growth expectations. The Vitol pipeline assets are located in what we believe are the three best counties in the Midland Basin. Adding a 2 million-barrel terminal in Midland is very complementary to our Permian strategy.”
