This morning, Phillips 66 Partners (PSXP 51.74, +3.22 +6.64%) announced a deal with Phillips 66 (PSX 90.06, +0.92 +1.03%) through which the company would acquire a 25% interest in each of Dakota Access, Energy Transfer Crude Oil Company, and Merey Sweeny.
Per the agreement, PSXP will buy PSX’s 25% interest in each of Dakota Access, LLC and Energy Transfer Crude Oil Company, LLC (collectively, the “Bakken Pipeline”) and 100 percent interest in Merey Sweeny, L.P. (“MSLP”), the owner of fuel-grade coke processing units at the Phillips 66 Sweeny Refinery. The company expects the deal to be immediately accretive to the Partnership and its unitholders and is anticipated to close in early October 2017.
The total transaction value of $2.4 billion includes $625 million in proportional non-consolidated, non-recourse Bakken Pipeline debt and $100 million of MSLP debt. The value reflects an about 8.9 times multiple, based on the acquired assets’ forecasted full year 2018 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of about $270 million. In connection with the MSLP acquisition, PSXP will enter into a new 15-year tolling agreement that includes a base throughput fee and minimum volume commitment from PSX.
As part of the transaction, the Partnership will assume certain Phillips 66 term loans and notes payable to PSX, which the Partnership expects to repay with a combination of proceeds from the private placement of equity and long-term debt. The Partnership will also issue $240 million in new PSXP units to PSX, allocated proportionately between common units and units issued to the general partner to maintain its 2% general partner interest.
As a bit of background, the Bakken Pipeline consists of 1,926 combined pipeline miles and 520,000 barrels per day (“BPD”) of crude oil capacity expandable to 570,000 BPD. There are receipt stations in North Dakota to access Bakken and Three Forks production, a delivery and receipt point in Patoka, Illinois, and delivery points in Nederland, Texas, including the Phillips 66 Beaumont Terminal.
Also, MSLP, owner of facilities that process residue from heavy sour crude oil into liquid products and fuel-grade petroleum coke at the Phillips 66 Sweeny Refinery in Old Ocean, Texas. The facilities include a 125,000 BPD capacity vacuum distillation unit and a 70,000 BPD capacity delayed coker unit.
To partly fund the deal, PSXP announced an agreement to sell $750 million of newly issued Series A Perpetual Convertible Preferred Units (the "Preferred Units") at a price of $54.27 per preferred unit and 6,304,204 common units at $47.59 per common unit in a private placement.