Texas Eastern Products Co. has agreed to acquire ARCO Pipe Line Co. from ARCO for $355 million.
The deal follows immediately on the heels of the proposed $7 billion sale of ARCO's Alaskan operations to Phillips Petroleum Co. (see related story, p. 32).
Texas Eastern Products, indirectly wholly owned by Duke Energy, is general partner of TEPPCO Partners LP. TEPPCO conducts business through two operating companies. Its TE Products Pipeline Co. LP is one of the largest common carriers of refined products and LPG in the US. The other entity, TEPPCO Crude Oil LLC, is a crude oil gathering, transportation, storage, and marketing company that operates primarily in Texas and Oklahoma.
Included in the sale are ARCO's interests in pipelines transporting crude and refined products from the Texas Gulf Coast to Cushing, Okla.; Midcontinent crude distribution services; and crude oil terminal facilities.
The sale is contingent on ARCO's proposed merger with BP Amoco PLC, but the parties said they expect to close that transaction within 60 days.
The acquisition "meets one of our strategic goals of owning assets complimentary to TEPPCO's existing businesses. It allows us to improve our regional competitiveness and realize substantial synergies within our existing asset base," said William L. Thacker, chairman and CEO of Texas Eastern Products.
What's involved
Under the agreement, TEPPCO will acquire ARCO's 50% ownership interest in Seaway Pipeline Co., in which Phillips subsidiaries are partners. The Seaway system includes a 350,000 b/d, 30-in. pipeline that carries mostly imported crude 500 miles from a Freeport, Tex., marine terminal to Cushing.
It also includes a 20-in., 550-mile, 85,000 b/d capacity pipeline that carries refined products from Pasadena, Tex., to Cushing.
Seaway's third major component is a crude oil terminal at Texas City, Tex., that primarily supplies refineries in the Houston area. TEPPCO will assume ARCO's role as operator of Seaway.
"Seaway is linked to the demand for offshore and foreign crudeellipsewhich enhances our existing oil business," Thacker said. "The products system is a vital link to the inland market, where demand is expected to grow."
As part of the deal, TEPPCO will also acquire ARCO's crude oil terminals at Cushing and Midland, Tex., including the line transfer and pumpover business at each location.
It also will get an undivided ownership interest in both the Rancho Pipeline, a 24-in., 400-mile crude pipeline from West Texas to Houston; and the Basin Pipeline, a 416-mile, 85,000 b/d capacity crude pipeline from Jal, NM, through Midland to Cushing. Both of those pipelines will be operated by another member of the undivided joint interest, however.
Also among the assets is ARCO's wholly owned West Texas Trunk System of receipt and delivery pipelines centered around Midland. The receipt pipelines consist of three 8-in. crude oil trunklines with a combined capacity in excess of 70,000 b/d. The delivery system is a single 8-in., 22,000 b/d capacity oil trunkline.
Acquisition of the ARCO facilities is expected to be accretive to both annual income and cash flow, starting in 2001, said Thacker.
"All of the revenue associated with the acquired assets is either tariff or fee-based and does not include lease gathering, marketing, or trading activity," he said.
