... Fairway Energy to Build Houston Crude Oil Storage Facility

Fairway Energy to Construct Houston Crude Oil Storage Facility

Fairway Energy Partners LLC plans to build a new crude oil facility in Houston, along with 21 miles of pipeline. The company recently closed a private equity offering, the net proceeds of which will be used to fund the construction of the first phase of the Pierce Junction Crude Oil Storage facility.

Fairway-Press-Release-07-23-2015Fairway-Press-Release-07-23-2015Fairway plans to use this capital to convert three existing underground storage caverns at the Pierce Junction Salt Dome in south Houston into crude oil storage service and to build out all of the requisite pipelines, brine ponds, interconnects and pumping capacity to put the facility in commercial service. FBR Capital Markets & Co., a subsidiary of FBR & Co., served as the sole placement agent and initial purchaser in this offering, which was executed pursuant to Rule 144A under the Securities Act of 1933 and other exemptions.

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The initial phase of the project is expected to be in service by the end of 2016 and has been designed to allow for storage of three segregations of crude oil for a total capacity of approximately 10 million barrels. Overall, Fairway has expansion rights up to a total of approximately 20 million barrels at Pierce Junction. Following the completion of Phase I, the company intends to take the project to its full capacity during a second phase of the project. Fairway has secured the exclusive right to store crude oil on the Pierce Junction Salt Dome.

Phase I also includes the construction of two separate bidirectional 24-in. pipelines intended to connect the facility to the existing Houston area crude oil grid, adding more than 1 million barrels per day (bpd) of pipeline receipt and delivery capability in the Houston marketplace. The proposed pipelines will traverse approximately 21 miles across the Houston area to connect the caverns to the Genoa Junction and Speed Junction hubs. This should enable Fairway to provide receipt capability from inbound crude oil pipelines from the Permian and Eagle Ford Basins, the Mid-Continent and Canadian regions as well as the Gulf of Mexico. The hubs provide downstream connectivity to terminals, refineries and water outlets located in the Houston Ship Channel, Texas City and Beaumont/Port Arthur market areas.

In the first phase, Fairway will also construct brine ponds with approximately 10 million barrels of capacity and central pumping and metering facilities at the site. The project is designed as a closed system, minimizing any new air emissions as well as customers’ volumetric losses.

“This project will serve the growing crude oil storage needs driven by the significant delivery of new pipeline-delivered crude oil into and through the Houston market. We’re offering a new, low-cost option to the market as a fee for service based provider. We do not intend to take title to the crude oil that we will handle and store, nor will we trade crude oil,” said Fairway CEO Chris Hilgert. “We are delighted to have the continued support of our original financial sponsor, Haddington Ventures LLC, as well as the new investors in Fairway who were brought to us through the engagement and efforts of FBR.”

Haddington was active in facilitating the transaction and will continue as a major investor in Fairway.

“We are very excited about our investment in Fairway,” said Chris Jones, managing partner of Haddington. “Our long history with underground storage fits well with Fairway’s initiative and we look forward to continuing our involvement with the company to advance this critical project into the marketplace.”

Fairway’s counsel for the transaction was Andrews Kurth LLP. Sidley Austin LLP represented FBR.

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