Devon Completes Access Pipeline sale
Devon Energy Corp. has completed the sale of its 50% ownership interest in Access Pipeline to Wolf Midstream Inc., a portfolio company of Canada Pension Plan Investment Board, for CAD $1.4 billion, or USD $1.1 billion. Devon also has the right to receive an incremental CAD $150 million payment from Wolf Midstream with the sanctioning and development of a new thermal-oil project on Devon's Pike lease in Alberta, Canada. The sale agreement further allows for Access Pipeline tolls to be reduced by as much as 30% with the future development of multiple projects at Pike.
With the close of Access Pipeline, Devon's divestiture program is now complete with total proceeds reaching USD $3.2 billion. At least two-thirds of the sales proceeds are expected to be utilized for debt reduction, with $1.2 billion of debt repurchased to date.
American Midstream Partners to merge with JP Energy Partners
American Midstream Partners LP and JP Energy Partners LP have executed a merger agreement to create a combined midstream platform.
American Midstream will acquire 100% of JP Energy in a unit-for-unit merger which is anticipated to have minimal, if any, tax recognition for the unitholders. In conjunction with the transaction, ArcLight Capital Partners LLC, the sponsor of both American Midstream and JP Energy, will combine the general partners of the two companies. Upon closing, the combined entity is expected to generate pro-forma Adjusted EBITDA of approximately $185 million, assuming 2016 mid-point guidance from each respective company and including run-rate synergies of approximately $10 million.
The merger of American Midstream and JP Energy will create a diversified midstream business operating in leading North American basins, including the Permian, Gulf of Mexico, Eagle Ford and Bakken. The combined partnership will have an estimated enterprise value of $2 billion.
Combined entity
Upon completion of the transaction, the combined partnership will be headquartered in Houston, Texas and the board of directors of the general partner of American Midstream will remain unchanged. Lynn L. Bourdon, III will serve as chairman and CEO and Eric T. Kalamaras will serve as CFO of the combined partnership.
The combined partnership will own and operate infrastructure representing:
- More than 3,100 miles of gathering and transportation pipeline,
- Over 2.5 Bcf/d of transportation capacity,
- Six processing plants with 400 MMcf/d of processing capacity,
- Three fractionation facilities with 20,000 b/d of capacity,
- 13.9% interest of offshore floating production facility (FPS) in the deep-water Gulf of Mexico,
- Over six million barrels of above-ground liquids storage capacity, and
- The third largest wholesale propane business in the US.
Agreement terms
Under the terms of the Merger Agreement, American Midstream common units will be issued to JP Energy public unitholders at an exchange ratio of 0.5775:1 and to affiliates of ArcLight that hold common units and subordinated units at an exchange ratio of 0.5225:1, resulting in a blended average exchange ratio of 0.55:1. Consideration received by JP Energy public unitholders is structured as a unit-for-unit exchange valued at $8.63 per common unit based on American Midstream's closing unit price as of October 21, 2016, representing a 14.5% premium to the closing price of JP Energy's common units of $7.54 on October 21, 2016 and a 14.2% premium to the volume weighted average closing price of JP Energy common units for the last 20 trading days ending October 21, 2016.
The general partner of JP Energy will be merged with the general partner of American Midstream, with the general partner of American Midstream continuing in its current form. ArcLight affiliates have agreed to provide additional support to the combined partnership to achieve average annual distributable cash flow per unit accretion of approximately 5% for 2017 and 2018. An affiliate of ArcLight will also support the merger through reimbursement of JP Energy's transaction and transition costs.
The transaction is expected to close in late 2016 or early 2017, subject to customary closing conditions, including effectiveness of a registration statement on Form S-4 related to the issuance of new American Midstream units to the JP Energy unitholders, approval by a majority of JP Energy public unitholders and regulatory approvals.
Bank of America Merrill Lynch acted as financial advisor to American Midstream and Simmons & Company International, Energy Specialists of Piper Jaffray acted as financial advisor to the Conflicts Committee of American Midstream. Locke Lord LLP acted as legal counsel to American Midstream and Thompson & Knight LLP acted as legal counsel to the Conflicts Committee of American Midstream. BMO Capital Markets acted as financial advisor to JP Energy and Latham & Watkins acted as legal counsel to JP Energy. Andrews Kurth LLP acted as legal advisor to ArcLight.
Phillips 66 Partners makes $1.3B acquisition
Phillips 66 Partners LP has reached agreement with Phillips 66 to acquire 30 crude, refined products and natural gas liquids (NGL) logistics assets for total consideration of $1.3 billion. The partnership plans to fund the acquisition with a combination of debt and $196 million in new PSXP units issued to Phillips 66, to be allocated proportionally between common units and general partner units allowing the general partner to maintain its 2% general partner interest. Upon closing, the Partnership will be entitled to receive the cash earnings associated with the acquired assets as of Oct. 1, 2016.
The acquisition consideration reflects an approximate 8.7 times multiple based on the forecasted full year 2017 earnings before interest, taxes, depreciation and amortization (EBITDA) attributable to the assets of approximately $150 million. In connection with the acquisition, Phillips 66 will enter into 10-year terminaling and throughput agreements that will include minimum volume commitments covering approximately 85% of forecasted volumes.
In a company brief dated October 11, Raymond James analysts said the $1.3 billion total transaction value "implies a purchase multiple of ~8.7x on expected 2017 annual EBITDA of $150 million - resulting in immediate accretion," and, importantly, "entitles PSXP to the cash earnings as of October 1, meaning the deal will close mid-quarter, but will be effective for all of 4Q16 (providing further model uplift). The transaction will be predominantly cash funded, with the partnership issuing only $196 million in new PSXP units to PSX."
To fund the transaction, the company has priced $1.125 billion of 10- and 30-year notes, with coupon interest rates of 3.55% and 4.90%, respectively - generating just over $1.1 billion in net proceeds, the analysts continued.
The transaction includes the following assets:
- A crude pipeline and terminal system that provides crude supply for Phillips 66's Ponca City Refinery, consisting of 503 miles of pipeline and 1.7 million barrels of storage;
- A refined products and NGL pipeline and terminal system that provides product takeaway transportation services for Phillips 66's Ponca City Refinery, consisting of 524 miles of pipeline and 1.7 million barrels of storage;
- A crude pipeline and terminal system that provides crude supply for Phillips 66's Billings Refinery, consisting of a 79% undivided interest in a 623-mile pipeline and 570,000 barrels of storage;
- A refined products pipeline and terminal system that provides product takeaway transportation services for Phillips 66's Billings Refinery, consisting of 342 miles of pipeline and 386,000 barrels of storage;
- A refined products and NGL terminal system that provides storage services for Phillips 66's Bayway Refinery, consisting of 2.0 million barrels of storage;
- A crude pipeline and terminal system that provides crude supply for the Phillips 66-operated Borger Refinery, consisting of 1,089 miles of pipeline and 400,000 barrels of storage; and
- A refined products pipeline and terminal system that provides product takeaway transportation services for the Phillips 66-operated Borger Refinery, consisting of 93 miles of pipeline, a 33% undivided interest in a 102-mile segment and a 54% undivided interest in a 19-mile segment of a 121-mile pipeline, a 50% interest in a 293-mile pipeline and 700,000 barrels of storage.
Evercore acted as financial advisor and Vinson & Elkins LLP acted as legal counsel.
Cornerstone begins operations, provides connectivity to Utica
MPLX LP's newly constructed Cornerstone Pipeline is now fully operational. The 50-mile pipeline is designed to transport condensate and natural gasoline in a batched system from origination facilities in Harrison County, OH, to a tank farm in East Sparta, OH, where it can then continue on to Marathon Petroleum's 93,000-b/d refinery in Canton, OH. MPLX is currently constructing and expanding additional pipelines to provide further distribution to the Midwest and Canada, which are expected to be complete in 2017.
"As the first Utica shale liquids pipeline, Cornerstone is the initial step in MPLX's plan to provide better connectivity to the basin, which creates another condensate and natural gas liquids transportation and marketing option for Marcellus and Utica producers and benefits end users," said MPLX chairman and CEO Gary R. Heminger.
Cornerstone Pipeline is comprised of a 42-mile, 16-inch pipeline from Cadiz to East Sparta with 180,000 b/d of capacity and an 8-mile, 8-inch pipeline from East Sparta to Canton with 45,000 b/d of capacity. Marathon Pipe Line LLC, a subsidiary of MPLX, will operate Cornerstone Pipeline from its operations center in Findlay, Ohio, and with local operational personnel.
MPLX is an MLP formed by Marathon Petroleum to own, operate, develop and acquire midstream energy infrastructure assets.
Grand Mesa commences line fill for new pipeline
Grand Mesa Pipeline LLC, a NGL Energy Partners LP subsidiary, has commenced line fill for its newly-constructed crude oil pipeline system from Weld County, CO to Cushing, OK. The pipeline is on schedule to be in commercial service on November 1, 2016. Construction of the Lucerne and Riverside origin stations in Colorado and the connection to the mainline pipeline is complete and expected to be approximately $18 million under budget.
The Grand Mesa Pipeline system includes an undivided joint ownership interest with Saddlehorn Pipeline Company LLC in a newly constructed 20-inch crude oil transportation pipeline. The initial capacity of the pipeline is 340,000 b/d, of which Grand Mesa owns 150,000 b/d. The Saddlehorn portion became operational in August 2016.
