Phillips 66 makes $2.4B deal for Bakken Pipeline JV interests, Merey Sweeny

Phillips 66 Partners LP (NYSE: PSXP) has reached an agreement with Phillips 66 (NYSE: PSX) to acquire its 25% interest in each of Dakota Access LLC and Energy Transfer Crude Oil Company LLC (collectively, the Bakken Pipeline) and 100% interest in Merey Sweeny LP (MSLP), the owner of fuel-grade coke processing units at the Phillips 66 Sweeny Refinery. The acquisition is expected 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 approximate 8.9 times multiple, based on the acquired assets’ forecasted full year 2018 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of approximately $270 million. In connection with the MSLP acquisition, Phillips 66 Partners will enter into a new 15-year tolling agreement that includes a base throughput fee and minimum volume commitment from Phillips 66.

Consideration for the acquisition is $1.7 billion. The Partnership plans to fund the acquisition through a combination of debt, proceeds from a private placement of equity units, and PSXP units issued to Phillips 66. As part of the transaction, the Partnership will assume certain Phillips 66 term loans and notes payable to Phillips 66, 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 Phillips 66, allocated proportionately between common units and units issued to the general partner to maintain its 2% general partner interest.

The transaction includes interests in the following assets:

The Bakken Pipeline, which consists of 1,926 combined pipeline miles and 520,000 barrels per day (b/d) of crude oil capacity expandable to 570,000 b/d. 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.

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.

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 comprised solely of independent directors. The conflicts committee engaged Evercore to act as its financial advisor and Vinson & Elkins LLP to act as its legal counsel.

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