UPDATE: Phillips 66 Partners Announces Partnership Will Buy $700M in Assets
Phillips 66 Partners LP (NYSE: PSXP) (“partnership”) announces that its first post-IPO acquisition will include Phillips 66's (NYSE: PSX) Gold Product Pipeline System, also known as the “Gold Line System,” and the Medford Spheres, two newly constructed refinery-grade propylene storage spheres, for a total consideration of $700 million. The dropdown from Phillips 66, which is targeted to occur March 1, 2014, is expected to be immediately accretive to the earnings and distributable cash flow of the partnership.
“We are pleased to announce our first acquisition since the partnership's initial public offering last July,” said Greg Garland, Phillips 66 Partners chairman and CEO. “The size and quality of this acquisition shows the commitment of Phillips 66 to grow and enhance the partnership's portfolio. Additionally, this transaction will position Phillips 66 Partners to deliver on its strategic plans of achieving top-quartile distribution growth.”
The assets to be acquired include:
The Gold Line System, consisting of a 681-mile refined products pipeline system that runs from the Phillips 66 operated refinery in Borger, Texas, to Cahokia, Ill., with access to the Phillips 66 refinery in Ponca City, Okla., as well as two parallel 54-mile lateral lines from Paola, Kan., to Kansas City, Kan. The system has a maximum throughput capacity of 132,000 barrels per day and includes four terminals respectively located at Wichita, Kan., Kansas City, Kan., Jefferson City, Mo. and Cahokia, Ill., with 172,000 barrels per day of aggregate throughput capacity and 4.3 million barrels of storage capacity. The Medford Spheres, located in Medford, Okla., with a total working capacity of 70,000 barrels and scheduled to commence operation March 1, providing an outlet for delivery of refinery-grade propylene from the Phillips 66 refinery in Ponca City, Okla., through interconnections with third-party pipelines, to Mont Belvieu, Texas. The partnership will finance the $700 million acquisition with cash on hand of $400 million, the issuance of additional units valued at $140 million, and a 5-year, $160 million note payable to a subsidiary of Phillips 66. The number of additional units will be based on the average daily closing price of the partnership's common units for the 10 trading days prior to February 13, 2014 or $38.86 per unit, with 98 percent issued as common units and 2 percent issued as general partner units.
In connection with the closing, Phillips 66 and the partnership will enter into transportation, storage and terminaling agreements that include minimum throughput volume commitments, with terms ranging from 5 to 10 years. The minimum volume commitments account for more than 80 percent of expected throughput volumes. The partnership expects these assets to contribute EBITDA of approximately $65 million to $70 million in their first full year of operation. Annual maintenance capital expenditures are initially expected to be between $3 million to $4 million.
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, which is comprised of independent directors and was advised by Evercore Partners as its financial advisor and Vinson & Elkins LLP as its legal counsel.
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