Phillips 66 Partners has reached agreement with Phillips 66 to acquire latter’s interests in three pipeline systems for close to $1bn.
The acquisition includes one-third equity interests in the limited liability companies that respectively own the Sand Hills and Southern Hills natural gas liquids (NGL) pipeline systems, and a 19.46% equity interest in Explorer Pipeline Company, the owner of the Explorer refined products pipeline system.
In exchange, Phillips 66 will receive total consideration of $1.01bn consisting of $880m in cash and 1,726,914 newly issued PSXP units, to be allocated between common units and general partner units in a proportion allowing the general partner to maintain its 2% general partner interest. The transaction is expected to be immediately accretive to the Partnership and its unitholders and is anticipated to close in early March 2015.
The total transaction value, including approximately $65m of proportional non-consolidated debt of Explorer Pipeline Company, reflects an approximate 9.5 times multiple of the forecasted full-year 2015 earnings before interest, taxes, depreciation and amortization (EBITDA) of $115 million.
“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 and is expandable up to 350,000 barrels per day 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, Texas market hub. The system has a capacity of 175,000 barrels per day.
- 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 barrels per day.
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.