Sunoco Logistics Partners LP has expanded its presence in the Permian Basin production area. The company and the Vitol Group announced Sept. 26 that Sunoco Logistics will acquire Vitol’s Permian Basin crude oil system.
Sunoco Logistics entered into an agreement with Vitol Inc. to purchase an integrated crude oil business in West Texas for approximately $760 million, plus working capital. The acquisition provides Sunoco Logistics with an approximately 2 million-barrel crude oil terminal in Midland, Texas. The deal also includes a crude oil gathering and mainline pipeline system in the Midland Basin, including a significant acreage dedication from an investment grade Permian producer, as well as crude oil inventories related to Vitol’s crude oil purchasing and marketing business in West Texas.
The acquisition also includes the purchase of a 50 percent interest in SunVit Pipeline LLC, making Sunoco Logistics the sole owner of all the membership interests in the pipeline system. SunVit connects the Midland terminal to Sunoco Logistics’ Permian Express 2 pipeline, a key takeaway to bring Permian crude oil to multiple markets. The deal is expected to close in the fourth quarter 2016, subject to closing conditions and regulatory approval.
“We are pleased to announce this strategic crude oil acquisition,” said Michael J. Hennigan, president and CEO of Sunoco Logistics. “The addition of the Vitol system is an excellent synergistic fit to our growing crude platform in the Permian Basin. 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 complimentary to our Permian strategy.”
Sunoco Logistics is a subsidiary of Sunoco Partners LLC, which in turn is owned by Energy Transfer Partners LP and Energy Transfer Equity LP. In connection with the acquisition, Energy Transfer Partners and Energy Transfer Equity will reduce the incentive distributions that Sunoco Partners receives from Sunoco Logistics 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.
“We appreciate Energy Transfer’s support on this acquisition,” Hennigan said. “They share our vision of the substantial growth opportunities from production in the Permian basin.”