From the Houston Business Journal
Phillips 66 Partners LP (NYSE: PSXP) will buy more assets from Phillips 66 (NYSE: PSX) for $2.4 billion, the Houston-based companies announced Sept. 22.
The deal is expected to close in early October, and it’s the largest acquisition the master limited partnership has made in its four-year history. Prior to this deal, the MLP’s largest was a $1.3 billion drop-down announced last October.
Phillips 66 is dropping down its 25 percent interest in both Dakota Access LLC and Energy Transfer Crude Oil Company LLC — Bakken Pipeline joint ventures — and its 100 percent interest in Merey Sweeny LP, which owns fuel-grade processing units at the Phillips 66 Sweeny Refinery.
The Bakken Access pipeline system consists of 1,926 combined pipeline miles — including the controversial Dakota Access Pipeline — and 520,000 barrels per day of crude oil capacity expandable to 570,000 BPD. Delivery points include the Phillips 66 Beaumont Terminal. Click here to learn more about the ownership structure of the pipeline system.
Merey Sweeny’s facilities include a 125,000-BPD-capacity vacuum distillation unit and a 70,000-BPD-capacity delayed coker unit at the Sweeny Refinery in Old Ocean. The facilities process residue from heavy sour crude oil into liquid products and fuel-grade petroleum coke, according to the companies’ Sept. 22 press release.
“The Bakken Pipeline complements our strategy to expand current systems that are integrated with Phillips 66 refineries and terminals, while MSLP provides another reliable source of cash flow generation to the portfolio,” Greg Garland, Phillips 66 Partners chairman and CEO, said in the press release.
The $2.4 billion deal includes $625 million in Bakken Pipeline debt, $100 million of Merey Sweeny debt, and consideration of $1.7 billion consisting of cash, debt and $240 million in partnership units. Also on Sept. 22, Phillips 66 Partners announced a private placement of $750 million of Series A perpetual convertible preferred units and $300 million common units to help pay for the deal.
“This acquisition supports our EBITDA growth objective by adding solid fee-based assets to the Partnership and keeps us on track to deliver our 30 percent distribution growth target,” Garland continued in the press release. “To meet our $1.1 billion of annual run-rate adjusted EBITDA goal by the end of 2018, we do not anticipate accessing the equity market, other than through selective use of our at-the-market program.”
Evercore served as financial adviser to Phillips 66 Partners’ conflicts committee, and Vinson & Elkins LLP acted as its legal counsel
