Shell Midstream Partners LP (NYSE: SHLX) has executed a contribution agreement to acquire Pecten Midstream LLC, which owns Lockport Crude Terminal and Auger Pipeline System, for $390 million from Shell Pipeline Co. LP, a wholly owned subsidiary of Royal Dutch Shell plc.
The acquisition price reflects an 8.6 times multiple of the assets’ forecasted 2016 adjusted earnings before interest, taxes, depreciation, and amortization. The acquisition will be effective Oct. 1, and is expected to be immediately accretive to unitholders.
In connection with the acquisition, Shell Midstream Partners increased its total borrowing capacity under its revolving credit facilities to $580 million. The acquisition is expected to close on Nov. 17. Shell Midstream Partners expects to fund the acquisition with proceeds from a capital markets transaction, borrowings under existing revolving credit facilities, cash on hand, or a combination thereof.
Auger is a 174-mile offshore Gulf of Mexico pipeline system that transports crude from producers in eastern Garden Banks and Keathley Canyon blocks. It shares a complementary strategic connection to Poseidon through SMI 205.
Lockport is a crude storage terminal facility located southwest of Chicago, with 2 million barrels of storage capacity that feeds regional refineries, while also offering strategic trading opportunities.
Terms of the acquisition were approved by the conflicts committee of the board of directors of the general partner of Shell Midstream Partners. This committee was advised by Evercore Group LLC as to financial matters, and Andrews Kurth LLP as to legal matters.