EnLink Midstream Partners LP (NYSE: ENLK) has entered into an agreement to acquire the Victoria Express Pipeline and related truck terminal and storage assets (VEX) from Devon Energy Corp. (NYSE: DVN). Total consideration for the transaction is $210–$220 million, including $171 million in cash, 338,000 of the Partnership’s common units, and EnLink’s assumption of $30–$40 million in certain construction costs to expand the system to full capacity, subject to adjustments.
The transaction, which is expected to close on or about April 1, is expected to be immediately accretive to the Partnership.
The VEX assets include a 56-mile multi-grade crude oil pipeline, as well as the pipeline’s destination facilities at the Port of Victoria, including an eight-bay truck unloading terminal, 200,000 barrels of above ground storage, of which 50,000 barrels are under construction, and rights to barge loading docks. Also included in the transaction are facilities near the origin of the pipeline that are currently under construction, including an eight-bay truck unloading terminal and 160,000 barrels of above-ground storage (the Cuero Facilities). The Cuero Facilities are expected to be operational in the second half of 2015.
The VEX pipeline, which became operational in the third quarter of 2014, currently transports condensate from DeWitt County to the Port of Victoria on the mid-coast of Texas. The pipeline’s current capacity is 50,000 barrels per day (bpd), and, following commencement of operations of the Cuero Facilities, will operate as a batched system designed to segregate up to three different products, including processed condensate deemed eligible for export, unprocessed condensate, and crude oil.
The $30–$40 million of additional capital EnLink will invest in 2015 includes the costs of construction being assumed by EnLink in the transaction to complete the Cuero Facilities and expand the pipeline capacity to approximately 90,000 bpd. The total transaction consideration represents a multiple of approximately 10 times VEX’s annualized projected 2015 adjusted EBITDA. Following the completion of the capacity expansion and anticipated volume growth in 2016, the transaction multiple is expected to decline to approximately six to eight times.
Devon will continue to support the VEX pipeline as a committed shipper pursuant to a long-term transportation services agreement that includes a minimum volume commitment.