Phillips 66 Partners LP(NYSE: PSXP) would buy pipeline and other assets from parent Phillips 66 in a $2.4 billion deal, which will strengthen the master limited partnership’s presence in the prolific Bakken basin. The announcement of the acquisition has sent the company’s shares up 4.8 percent in morning trading. The transactions includes $625 million in Bakken Pipeline debt and $100 million of MSLP debt.
PSXP has entered into an agreement to sell $750 million of newly issued Series A Perpetual Convertible 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. The private placement is expected to close in early October 2017, after the satisfaction of customary closing conditions. The company expects to use a portion of the net proceeds from the offering to fund its announced acquisition of a 25 percent interest in each of Dakota Access, LLC and Energy Transfer Crude Oil Company, LLC (collectively, the “Bakken Pipeline”), and a 100 percent interest in Merey Sweeny, L.P. The Partnership are expected to use the remaining proceeds for general partnership purposes, including funding of future acquisitions and organic projects and repayment of outstanding indebtedness.
Moreover, the assets include 1,926 combined pipeline miles and 520,000 barrels per day of crude oil capacity expandable to 570,000 b/d. The receipt stations in North Dakota access Bakken and Three Forks production, a delivery and receipt point in Patoka, IL, and delivery points in Nederland, TX, including the Phillips 66 Beaumont Terminal. MSLP facilities in Old Ocean, TX, include a 125,000 b/d capacity vacuum distillation unit and a 70,000 b/d capacity delayed coker unit. As per the Morningstar analysts, the deal supports the partnership’s objective of 30 percent distribution growth and its $1.1 billion earnings before interest, tax, depreciation and amortization (EBITDA) goal by the end of 2018.
Additionally, the Bakken Pipeline complements the company’s strategy to expand current systems that are integrated with Phillips 66 refineries and terminals, while MSLP provides another reliable source of cash flow generation to the portfolio