Phillips 66 Partners LP announced that it has reached agreement with Phillips 66 to acquire Phillips 66’s interests in three pipeline systems. The acquisition includes one-third equity interests in the limited liability companies that respectively own the Sand Hills and Southern Hills natural gas liquids (NGL) pipeline systems, and a 19.46% equity interest in Explorer Pipeline Company, the owner of the Explorer refined products pipeline system.
In exchange, Phillips 66 will receive total consideration of US$1.01 billion consisting of US$880 million in cash and 1 726 914 newly issued PSXP units, to be allocated between common units and general partner units in a proportion allowing the general partner to maintain its 2% general partner interest. The transaction is expected to be immediately accretive to the Partnership and its unitholders and is anticipated to close in early March 2015.
The total transaction value, including approximately US$65 million of proportional non-consolidated debt of Explorer Pipeline Company, reflects an approximate 9.5 times multiple of the forecasted full-year 2015 earnings before interest, taxes, depreciation and amortisation (EBITDA) of US$115 million attributable to these equity interests. Based on current projections for the twelve months ending 29 February, 2016, the transaction is expected to be more than 20 percent accretive to distributable cash flow of the Partnership over that period.
“This acquisition will expand our fee-based portfolio into NGL transportation and provide us with an interest in one of the largest refined products pipeline systems in the US,” said Greg Garland, Phillips 66 Partners chairman and Chief Executive Officer. “Our addition of these diversified assets demonstrates our commitment to providing strong growth for our unitholders.”
The transaction includes Phillips 66’s equity interests in entities holding the following assets:
- Sand Hills NGL Pipeline System: A 720 mile NGL pipeline system that provides takeaway service from DCP Midstream and third-party plants in the Permian and the Eagle Ford basins to fractionation facilities along the Texas Gulf Coast and the Mont Belvieu, Texas market hub. The system has a capacity of 200 000 bpd and is expandable up to 350 000 bpd with additional pumping stations.
- Southern Hills NGL Pipeline System: An 800-mile NGL pipeline system that provides takeaway service from DCP Midstream and third-party plants in the Midcontinent to fractionation facilities along the Texas Gulf Coast and the Mont Belvieu, Texas market hub. The system has a capacity of 175 000 bpd. Explorer Refined Products Pipeline System: A 1830 mile refined products pipeline system, which provides connectivity to refineries and market centers from the Gulf Coast to the Midwest. The system has a capacity of 660 000 bpd.
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, which is comprised solely of independent directors. The conflicts committee engaged Evercore Partners to act as its financial advisor and Vinson & Elkins, LLP to act as its legal counsel.
Adapted from press release by Hannah Priestley-Eaton