Shell Midstream Partners, L.P. (NYSE: SHLX) today announced
it has agreed to acquire from Shell an additional 20 percent equity
interest in Mars Oil Pipeline Company (Mars) and a 49 percent
equity interest in Odyssey Pipeline L.L.C. (Odyssey) for $350
million.
“This acquisition further diversifies the Shell
Midstream Partners portfolio with the inclusion of a
well-positioned eastern Gulf of Mexico asset. In addition,
the partnership acquired an additional interest in an existing
asset with a strong track record of delivery,” said John Hollowell,
CEO of Shell Midstream Partners. “Both Mars and Odyssey build
on our key corridor pipeline strategy in the Gulf of Mexico and are
advantageously positioned to continue to capture growth of offshore
volumes along our footprint of assets.”
The acquisition price reflects an approximate
8.4 times multiple of the forecasted 2017 Adjusted EBITDA of the
acquired interests. The acquisition is expected to be immediately
accretive to unitholders and funded with a combination of cash on
hand and borrowings under Shell Midstream Partners’ credit
facilities. The acquisition is expected to close on October
3, 2016.
Mars and Odyssey Highlights:
- Mars delivers crude from the prolific Mars Basin and the
Amberjack system, offering 600 kbpd of capacity into LOOP’s
Clovelly facility
- Odyssey has 220 kbpd of capacity from the eastern Gulf of
Mexico to the Delta Pipeline system, enabling deliveries to
refineries in Louisiana and Mississippi
The terms of the acquisition were approved by
the Conflicts Committee of the Board of Directors of the General
Partner of Shell Midstream Partners, which is composed entirely of
independent directors. This committee was advised by Evercore
Group, L.L.C. as to financial matters and Akin Gump Strauss Hauer
& Feld LLP as to legal matters.
# # #
About Shell Midstream Partners, L.P. Shell Midstream Partners,
headquartered in Houston, Texas, is a fee-based, growth-oriented
midstream master limited partnership formed by Royal Dutch Shell to
own, operate, develop and acquire pipelines and other midstream
assets. Shell Midstream Partners’ assets consist of pipelines,
crude tank storage and terminal systems that serve as key
infrastructure to transport and store onshore and offshore crude
oil production to Gulf Coast and Midwest refining markets and to
deliver refined products from Gulf Coast markets to major demand
centers.
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FORWARD-LOOKING STATEMENTS
This press release includes various “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements other than statements of historical fact
are, or may be deemed to be, forward-looking statements.
Forward-looking statements are statements of future expectations
that are based on management’s current expectations and assumptions
and involve known and unknown risks and uncertainties that could
cause actual results, performance or events to differ materially
from those expressed or implied in these statements.
Forward-looking statements include statements expressing
management’s expectations, beliefs, estimates, forecasts,
projections and assumptions, including statements regarding the
benefits of the transaction, the prospects for and financial
performance of the acquired assets and the financing and closing of
the transaction. You can identify our forward-looking statements by
words such as “anticipate”, “believe”, “estimate”, “expect”,
“forecast”, “goals”, “objectives”, “outlook”, “intend”, “plan”,
“predict”, “project”, “risks,” “schedule,” “seek”, “target”,
“could”, “may”, “will,” “should” or “would” or other similar
expressions that convey the uncertainty of future events or
outcomes. In accordance with “safe harbor” provisions of the
Private Securities Litigation Reform Act of 1995, these statements
are accompanied by cautionary language identifying important
factors, though not necessarily all such factors, which could cause
future outcomes to differ materially from those set forth in
forward-looking statements. In particular, expressed or implied
statements concerning future actions, future drop downs, volumes,
capital requirements, conditions or events, future impact of prior
acquisitions, future operating results or the ability to generate
sales, income or cash flow or the amount of distributions are
forward-looking statements. Forward-looking statements are not
guarantees of performance. They involve risks, uncertainties and
assumptions. Future actions, conditions or events and future
results of operations may differ materially from those expressed in
these forward-looking statements. Forward-looking statements speak
only as of the date of this press release, September 27, 2016, and
we disclaim any obligation to update such statements for any
reason, except as required by law. All forward-looking statements
contained in this document are expressly qualified in their
entirety by the cautionary statements contained or referred to in
this paragraph. Many of the factors that will determine these
results are beyond our ability to control or predict. These factors
include the risk factors described in Part I, Item 1A. “Risk
Factors” in our Annual Report on Form 10-K for the year ended
December 31, 2015, as updated by our other filings with the SEC. If
any of those risks occur, it could cause our actual results to
differ materially from those contained in any forward-looking
statement. Because of these risks and uncertainties, you should not
place undue reliance on any forward-looking statement.
NON-GAAP FINANCIAL MEASURES
This press release includes the terms Adjusted EBITDA and cash
available for distribution. We believe that the presentation of
Adjusted EBITDA and cash available for distribution provides useful
information to investors in assessing our financial condition and
results of operations. Adjusted EBITDA and cash available for
distribution are non-GAAP supplemental financial measures that
management and external users of our condensed consolidated
financial statements, such as industry analysts, investors, lenders
and rating agencies, may use to assess:
- our operating performance as compared to other publicly traded
partnerships in the midstream energy industry, without regard to
historical cost basis or, in the case of Adjusted EBITDA, financing
methods;
- the ability of our business to generate sufficient cash to
support our decision to make distributions to our unitholders;
- our ability to incur and service debt and fund capital
expenditures; and
- the viability of acquisitions and other capital expenditure
projects and the returns on investment of various investment
opportunities.
The GAAP measures most directly comparable to Adjusted EBITDA
and cash available for distribution are net income and net cash
provided by operating activities. These non-GAAP measures should
not be considered as alternatives to GAAP net income or net cash
provided by operating activities. Adjusted EBITDA and cash
available for distribution have important limitations as analytical
tools because they exclude some but not all items that affect net
income and net cash provided by operating activities. They should
not be considered in isolation or as substitutes for analysis of
our results as reported under GAAP. Additionally, because Adjusted
EBITDA and cash available for distribution may be defined
differently by other companies in our industry, our definition of
Adjusted EBITDA and cash available for distribution may not be
comparable to similarly titled measures of other companies, thereby
diminishing their utility.
References in this press release to Adjusted EBITDA refer to net
income before income taxes, net interest expense, gain or loss from
disposition of fixed assets, allowance oil reduction to net
realizable value, and depreciation, amortization and accretion,
plus cash distributed to Shell Midstream Partners, L.P. from equity
investments for the applicable period, less income from equity
investments. We define Adjusted EBITDA attributable to Shell
Midstream Partners as Adjusted EBITDA less Adjusted EBITDA
attributable to noncontrolling interests. References to cash
available for distribution refer to Adjusted EBITDA attributable to
Shell Midstream Partners, less maintenance capital expenditures
attributable to Shell Midstream Partners, net interest paid, cash
reserves and income taxes paid, plus net adjustments from volume
deficiency payments attributable to Shell Midstream Partners and
certain one-time payments not reflected in net income. Cash
available for distribution will not reflect changes in working
capital balances.
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