Phillips 66 Partners Pays $1 Billion for Midstream Pipeline Acquisition
Houston-based Phillips 66 has agreed to let its master limited partnership, Phillips 66 Partners LP, to acquire interests in three pipeline systems for $1 billion.
The $1.01 billion deal includes $880 million in cash and an issuance of 1.7 million new stock units for a one-third equity stake in the Sand Hills and Southern Hills natural gas liquids (NGL) pipeline systems and nearly a 20 percent stake in the Oklahoma-based Explorer Pipeline Co., according to a Feb. 16 company statement. The transaction is expected to close in early March 2015.
The total transaction value, including approximately $65 million of proportional non-consolidated debt of Explorer Pipeline Co., reflects an approximate 9.5 times multiple of the forecasted full-year 2015 earnings before interest, taxes, depreciation and amortization (EBITDA) of $115 million attributable to these equity interests. Based on current projections for the 12 months ending Feb. 29, 2016, the transaction is expected to be more than 20 percent accretive to distributable cash flow of the Partnership over that period.
“This acquisition will expand our fee-based portfolio into NGL transportation and provide us with an interest in one of the largest refined products pipeline systems in the U.S.,” said Greg Garland, Phillips 66 Partners chairman and CEO. “Our addition of these diversified assets demonstrates our commitment to providing strong growth for our unitholders.”
The transaction includes Phillips 66’s equity interests in entities holding the following assets:
- Sand Hills NGL Pipeline System: A 720-mile NGL pipeline system that provides takeaway service from DCP Midstream and third-party plants in the Permian and the Eagle Ford basins to fractionation facilities along the Texas Gulf Coast and the Mont Belvieu, Texas market hub. The system has a capacity of 200,000 barrels per day (bpd) and is expandable up to 350,000 bpd with additional pumping stations.
- Southern Hills NGL Pipeline System: An 800-mile NGL pipeline system that provides takeaway service from DCP Midstream and third-party plants in the Midcontinent to fractionation facilities along the Texas Gulf Coast and the Mont Belvieu market hub. The system has a capacity of 175,000 bpd.
- Explorer Refined Products Pipeline System: A 1,830 mile refined products pipeline system, which provides connectivity to refineries and market centers from the Gulf Coast to the Midwest. The system has a capacity of 660,000 bpd.
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, which is comprised solely of independent directors. The conflicts committee engaged Evercore Partners to act as its financial advisor and Vinson & Elkins LLP to act as its legal counsel.Explorer Pipeline Co., Phillips 66 Partners, Sand Hills Pipeline, Southern Hills Pipeline