Phillips 66 Partners Announces First Asset Acquisition
February 13 2014 - 11:41AM
Business Wire
Partnership to acquire $700 Million in
Assets from Phillips 66
Phillips 66 Partners LP (NYSE:PSXP) (“partnership”) announces
that its first post-IPO acquisition will include Phillips 66’s
(NYSE:PSX) Gold Product Pipeline System, also known as the “Gold
Line System,” and the Medford Spheres, two newly constructed
refinery-grade propylene storage spheres, for a total consideration
of $700 million. The dropdown from Phillips 66, which is targeted
to occur March 1, 2014, is expected to be immediately accretive to
the earnings and distributable cash flow of the partnership.
“We are pleased to announce our first acquisition since the
partnership’s initial public offering last July,” said Greg
Garland, Phillips 66 Partners chairman and CEO. “The size and
quality of this acquisition shows the commitment of Phillips 66 to
grow and enhance the partnership’s portfolio. Additionally, this
transaction will position Phillips 66 Partners to deliver on its
strategic plans of achieving top-quartile distribution growth.”
The assets to be acquired include:
- The Gold Line System, consisting of a
681-mile refined products pipeline system that runs from the
Phillips 66 operated refinery in Borger, Texas, to Cahokia,
Ill., with access to the Phillips 66 refinery in Ponca City, Okla.,
as well as two parallel 54-mile lateral lines from Paola, Kan., to
Kansas City, Kan. The system has a maximum throughput capacity of
132,000 barrels per day and includes four terminals respectively
located at Wichita, Kan., Kansas City, Kan., Jefferson City, Mo.
and Cahokia, Ill., with 172,000 barrels per day of aggregate
throughput capacity and 4.3 million barrels of storage
capacity.
- The Medford Spheres, located in
Medford, Okla., with a total working capacity of 70,000 barrels and
scheduled to commence operation March 1, providing an outlet for
delivery of refinery-grade propylene from the Phillips 66 refinery
in Ponca City, Okla., through interconnections with third-party
pipelines, to Mont Belvieu, Texas.
The partnership will finance the $700 million acquisition with
cash on hand of $400 million, the issuance of additional units
valued at $140 million, and a 5-year, $160 million note payable to
a subsidiary of Phillips 66. The number of additional units will be
based on the average daily closing price of the partnership’s
common units for the 10 trading days prior to February 13, 2014 or
$38.86 per unit, with 98 percent issued as common units and 2
percent issued as general partner units.
In connection with the closing, Phillips 66 and the partnership
will enter into transportation, storage and terminaling agreements
that include minimum throughput volume commitments, with terms
ranging from 5 to 10 years. The minimum volume commitments account
for more than 80 percent of expected throughput volumes. The
partnership expects these assets to contribute EBITDA of
approximately $65 million to $70 million in their first full year
of operation. Annual maintenance capital expenditures are initially
expected to be between $3 million to $4 million.
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 of independent directors and was advised by Evercore
Partners as its financial advisor and Vinson & Elkins LLP as
its legal counsel.
For more information about the assets involved in this
transaction, visit http://www.phillips66partners.com/EN/newsroom/Documents/factsheet-gold-line-and-medford.pdf
About Phillips 66 Partners
Headquartered in Houston, Texas, Phillips 66 Partners is a
growth-oriented traditional 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. For more information, visit www.phillips66partners.com.
CAUTIONARY STATEMENTS
This press release contains forward-looking
statements as defined under the federal securities laws, including
projections, plans and objectives. Although the companies believe
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 the companies’ control. If
one or more of these risks or uncertainties materialize, or if
underlying assumptions prove incorrect, actual results may vary
materially from what the companies anticipated, estimated,
projected or expected. The key risk factors that may have a direct
bearing on the forward-looking statements are described in the
filings that each company 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 the companies undertake 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 term EBITDA, which is a non-GAAP
financial measure. We define EBITDA as earnings before interest,
taxes, depreciation and amortization. EBITDA is included to help
facilitate comparisons of forecasted operating performance of the
assets to be acquired with other companies in our industry. The
GAAP measure most directly comparable to EBITDA is net income.
EBITDA has important limitations as an analytical tool because it
excludes some but not all items that affect net income.
Additionally, because EBITDA may be defined differently by other
companies in our industry, our definition of EBITDA may not be
comparable to similarly titled measures of other companies, thereby
diminishing its utility.
PHILLIPS 66 PARTNERS LP
RECONCILIATION OF FORECASTED EBITDA TO
AMOUNTS UNDER US GAAP
(Unaudited, in millions)
Reconciliation of Forecasted EBITDA to Forecasted Net
Income:
Full Year beginning March 1,
2014 Gold Line System and Medford Spheres
Forecasted net income $ 51 - 56 Add: Forecasted depreciation and
amortization expenses 9 Add: Forecasted interest expense 5
Forecasted EBITDA $ 65 - 70
Phillips 66 Partners LPRich Johnson, 832-765-1016
(media)rich.johnson@p66.comorWilliam
Steen, 832-765-3174 (investors)william.steen@p66.com
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