Valero Energy Partners LP (NYSE: VLP) has approved the acquisition from certain subsidiaries of Valero Energy Corp. (NYSE: VLO) of the McKee Crude System, Three Rivers Crude System, and Wynnewood Products System for total consideration of $154 million. The drop-down transaction is expected to close on July 1, and to be funded with the Partnership's cash on hand.
The assets to be acquired include:
- The McKee Crude System, located in Sunray, Texas, which has 72,000 barrels per day of throughput capacity and supplies approximately 40 percent of the crude oil processed at Valero's McKee refinery. The system consists of more than 200 miles of pipelines, 20 crude oil truck unloading sites with lease automatic custody transfer units, and 240,000 barrels of storage capacity.
- The Three Rivers Crude System, located in the Eagle Ford shale region in South Texas, consisting of 11 crude oil truck unloading sites with lease automatic custody transfer units and a 1-mile, 12-inch pipeline with a capacity of 110,000 barrels per day that delivers crude oil to tanks at Valero's Three Rivers refinery. The system also receives locally produced crude oil via connections to the Harvest Arrowhead pipeline system and the Plains Gardendale pipeline for processing at the Three Rivers refinery or for shipment through third-party pipelines to Valero's two refineries in Corpus Christi, Texas.
- The Wynnewood Products System, located in Ardmore, Oklahoma, consisting of a 30-mile, 12-inch refined petroleum products pipeline with 90,000 barrels per day of capacity and two tanks with a total of 180,000 barrels of storage capacity. The system connects Valero's Ardmore refinery to the Magellan refined products pipeline system and is the primary distribution outlet for the refinery.
Upon closing, the Partnership plans to enter into 10-year term transportation and terminaling agreements with subsidiaries of Valero. These agreements are expected to contain minimum throughput volume commitments that account for approximately 90 percent of expected throughput volumes. The to-be acquired assets are expected to contribute $15.4 million of EBITDA in their first full year of operation.