Acquisition includes Interests in Bakken Pipeline Joint Ventures and
Merey Sweeny, L.P.
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Transaction valued at $2.4 billion
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Consideration of $1.7 billion consisting of cash, debt and
partnership units
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Expected to be immediately accretive to unitholders
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Assets include 25 percent interest in Bakken Pipeline joint
ventures and 100 percent interest in Merey Sweeny, L.P.
HOUSTON--(BUSINESS WIRE)--
Phillips 66 Partners LP (NYSE: PSXP) (the “Partnership”) has reached
agreement with Phillips 66 (NYSE: PSX) to acquire its 25 percent
interest in each of Dakota Access, LLC and Energy Transfer Crude Oil
Company, LLC (collectively, the “Bakken Pipeline”) and 100 percent
interest in Merey Sweeny, L.P. (“MSLP”), the owner of fuel-grade coke
processing units at the Phillips 66 Sweeny Refinery. The acquisition is
expected to be immediately accretive to the Partnership and its
unitholders and is anticipated to close in early October 2017.
The total transaction value of $2.4 billion includes $625 million in
proportional non-consolidated, non-recourse Bakken Pipeline debt and
$100 million of MSLP debt. The value reflects an approximate 8.9 times
multiple, based on the acquired assets’ forecasted full year 2018
adjusted earnings before interest, taxes, depreciation and amortization
(EBITDA) of approximately $270 million. In connection with the MSLP
acquisition, Phillips 66 Partners will enter into a new 15-year tolling
agreement that includes a base throughput fee and minimum volume
commitment from Phillips 66.
Consideration for the acquisition is $1.7 billion. The Partnership plans
to fund the acquisition through a combination of debt, proceeds from a
private placement of equity units, and PSXP units issued to Phillips 66.
As part of the transaction, 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. The Partnership 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 percent general partner interest.
“This is the largest acquisition PSXP has made to date,” said Greg
Garland, Phillips 66 Partners chairman and CEO. “The Bakken Pipeline
complements our 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. This
acquisition supports our EBITDA growth objective by adding solid
fee-based assets to the Partnership and keeps us on track to deliver our
30 percent distribution growth target. To meet our $1.1 billion of
annual run-rate adjusted EBITDA goal by the end of 2018, we do not
anticipate accessing the equity market, other than through selective use
of our at-the-market program.”
The transaction includes interests in the following assets:
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The Bakken Pipeline, which consists of 1,926 combined pipeline miles
and 520,000 barrels per day (“BPD”) of crude oil capacity expandable
to 570,000 BPD. There are receipt stations in North Dakota to access
Bakken and Three Forks production, a delivery and receipt point in
Patoka, Illinois, and delivery points in Nederland, Texas, including
the Phillips 66 Beaumont Terminal.
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MSLP, owner of facilities that process residue from heavy sour crude
oil into liquid products and fuel-grade petroleum coke at the Phillips
66 Sweeny Refinery in Old Ocean, Texas. The facilities include a
125,000 BPD capacity vacuum distillation unit and a 70,000 BPD
capacity delayed coker unit.
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 comprised solely of
independent directors. The conflicts committee engaged Evercore to act
as its financial advisor and Vinson & Elkins, L.L.P. to act as its legal
counsel.
About Phillips 66 Partners
Headquartered in Houston, Texas, Phillips 66 Partners is a
growth-oriented master limited partnership formed by Phillips 66 to own,
operate, develop and acquire primarily fee-based crude oil, refined
petroleum product and natural gas liquids pipelines and terminals and
other transportation and midstream assets.
CAUTIONARY STATEMENTS
This press release contains forward-looking statements as defined
under the federal securities laws, including projections, plans and
objectives. Although Phillips 66 Partners believes that expectations
reflected in such forward-looking statements are reasonable, no
assurance can be given that such expectations will prove to be correct.
In addition, these statements are subject to certain risks,
uncertainties and other assumptions that are difficult to predict and
may be beyond Phillips 66 Partners’ control. If one or more of these
risks or uncertainties materialize, or if underlying assumptions prove
incorrect, actual results may vary materially from what Phillips 66
Partners anticipated, estimated, projected or expected. The key risk
factors that may have a direct bearing on the forward-looking statements
are the accuracy of our assumptions used to estimate the benefits to be
realized from the acquisition, our ability to successfully complete the
acquisition and integrate the assets into our operations, and other
factors as described in the filings that Phillips 66 Partners makes with
the Securities and Exchange Commission. In light of these risks,
uncertainties and assumptions, the events described in the
forward-looking statements might not occur or might occur to a different
extent or at a different time than as described. All forward-looking
statements in this release are made as of the date hereof and Phillips
66 Partners undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Use of Non-GAAP Financial Information -- This news release
includes the terms forecasted adjusted EBITDA and annual run-rate
adjusted EBITDA. These are non-GAAP financial measures. Forecasted
adjusted EBITDA is based on the Partnership’s projections for the
acquired assets, including throughput fees expected to be paid by
Phillips 66 under commercial agreements that were entered into in
connection with the acquisition of the 100 percent interest in Merey
Sweeny, L.P. Forecasted adjusted EBITDA is included to help facilitate
transaction value analysis, as well as help facilitate an assessment of
the acquired assets' contributions to PSXP’s future EBITDA growth.
Annual run-rate EBITDA is a forecast of future EBITDA, and is based on
the Partnership’s projections of annual adjusted EBITDA inclusive of
current assets and future potential acquisitions by the Partnership.
Annual run-rate adjusted EBITDA is included to demonstrate management’s
intention of future growth through acquisitions and organic projects.
Forecasted adjusted EBITDA and annual run-rate adjusted EBITDA are
not presented as alternatives to the nearest GAAP financial measure, net
income, and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with GAAP. We are unable
to present a reconciliation of forecasted adjusted EBITDA and annual
run-rate adjusted EBITDA because certain elements of net income,
including interest, depreciation and taxes, are not available. Together,
these items generally result in adjusted EBITDA being significantly
greater than net income.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170922005315/en/
Source: Phillips 66 Partners LP