Phillips 66 Partners to buy Phillips 66’s Bakken Pipeline stake, Merey Sweeny
Phillips 66 Partners LP has agreed to acquire Phillips 66’s 25% interest in each of Dakota Access LLC and Energy Transfer Crude Oil Co. LLC as well as 100% interest in Merey Sweeny LP.
The $2.4-billion deal includes the Bakken Pipeline, which consists of 1,926 combined pipeline miles and 520,000 b/d of crude oil capacity that’s expandable to 570,000 b/d. The system has receipt stations in North Dakota to access Bakken and Three Forks production, a delivery and receipt point in Patoka, Ill., and delivery points in Nederland, Tex., including the Phillips 66 Beaumont terminal.
Merey Sweeny owns facilities that process residue from heavy sour crude into liquid products and fuel-grade petroleum coke at Phillips 66’s 247,000-b/d Sweeny refinery in Old Ocean, Tex. The facilities include a 125,00-b/d vacuum distillation unit and a 70,000-b/d delayed coker unit.
In connection with the Merey Sweeny acquisition, Phillips 66 Partners will enter into a 15-year tolling agreement that includes a base throughput fee and minimum volume commitment from Phillips 66.
“This is the largest acquisition [Phillips 66 Partners] has made to date,” commented Greg Garland, Phillips 66 Partners chairman and chief executive officer. “The Bakken Pipeline complements our strategy to expand current systems that are integrated with Phillips 66 refineries and terminals, while [Merey Sweeny] provides another reliable source of cash flow generation to the portfolio.”
The deal is expected to close in early October. Consideration for the acquisition is $1.7 billion. The total deal value includes $625 million in proportional nonconsolidated, nonrecourse Bakken Pipeline debt and $100 million of Merey Sweeny debt.
Phillips 66 Partners plans to fund the purchase through a combination of debt, proceeds from a private placement of equity units, and PSXP units issued to Phillips 66. As part of the deal, 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.
Phillips 66 Partners 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.