Phillips 66 Partners LP has reached an agreement with its parent company to acquire a pipeline and related assets in Texas, Oklahoma and Kansas for $775 million.
The deal includes the Standish Pipeline and the remaining 75 percent interest in Phillips 66 Sweeny Frac LLC, which owns the newly constructed Sweeny Fractionator One and Clemens Caverns storage facility.
Houston-based Phillips 66 Partners is a growth-oriented master limited partnership formed by Phillips 66 to own, operate, develop and acquire primarily fee-based crude oil, refined petroleum product and natural gas liquids pipelines, terminals and other transportation and midstream assets.
The Phillips 66 Partners previously acquired a 25 percent interest in Sweeny Frac LLC in March. The Partnership expects to fund this acquisition with a combination of newly issued stock units to Phillips 66 and the assumption of notes payable to Phillips 66. The acquisition is expected close later this month, according to a May 4 announcement.
The acquisition consideration is based on forecasted annual earnings of approximately $90 million, attributable to the assets and interest acquired in the transaction, and $13 million of remaining growth capital expenditures expected to be incurred by the Partnership for additional Clemens Caverns development.
“The acquisition provides the Partnership with full ownership in Sweeny Fractionator One and the Clemens Caverns, further diversifying our fee-based portfolio,” said Greg Garland, Phillips 66 Partners chairman and CEO. “The addition of the Standish Pipeline is consistent with our plan to build out our current systems that are strategically integrated with Phillips 66 refineries. We remain on track to deliver our stated five-year compound annual distribution growth target of 30 percent through the end of 2018.”
The transaction includes the following assets:
- Sweeny Fractionator One: A 100,000-barrel per day (bpd) NGL fractionator located within the Phillips 66 Sweeny Refinery complex in Old Ocean, Texas.
- Clemens Caverns storage facility: Located approximately 15 miles southeast of the Sweeny Refinery, the facility includes five newly developed caverns that will have storage capacity of approximately 7.5 million barrels of Y-grade NGL, propane and butane, with the capability for future capacity expansion.
- Standish Pipeline: A refined petroleum products pipeline system extending from Phillips 66’s Ponca City Refinery in Ponca City, Oklahoma, to the Partnership’s North Wichita Terminal in Wichita, Kansas.
Phillips 66 and the Partnership are parties to fractionation and storage agreements, each with a 10-year term, that include a minimum fractionation volume commitment for Sweeny Fractionator One and minimum storage commitments at the Clemens Caverns storage facility.
The terms of the transaction were approved by the board of directors of the general partner of Phillips 66 Partners, based on the approval and recommendation of its conflicts committee comprised solely of independent directors. The conflicts committee engaged Evercore to act as its financial advisor and Vinson & Elkins LLP to act as its legal counsel.