P66 Partners Acquires Interests in Bakken Pipeline and Merey Sweeney L.P. for $2.4 Billion

Phillips 66 Partners LP, September 22, 2017

Phillips 66 Partners LP (the “Partnership”) has reached agreement with Phillips 66 to acquire its 25 percent interest in each of Dakota Access, LLC and Energy Transfer Crude Oil Company, LLC (collectively, the “Bakken Pipeline”) and 100 percent interest in Merey Sweeny, L.P. (“MSLP”), the owner of fuel-grade coke processing units at the Phillips 66 Sweeny Refinery. The acquisition is expected to be immediately accretive to the Partnership and its unitholders and is anticipated to close in early October 2017.

The total transaction value of $2.4 billion includes $625 million in proportional non-consolidated, non-recourse Bakken Pipeline debt and $100 million of MSLP debt. The value reflects an approximate 8.9 times multiple, based on the acquired assets’ forecasted full year 2018 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of approximately $270 million. In connection with the MSLP acquisition, Phillips 66 Partners will enter into a new 15-year tolling agreement that includes a base throughput fee and minimum volume commitment from Phillips 66.

Consideration for the acquisition is $1.7 billion. The Partnership plans to fund the acquisition through a combination of debt, proceeds from a private placement of equity units, and PSXP units issued to Phillips 66. As part of the transaction, the Partnership will assume certain Phillips 66 term loans and notes payable to Phillips 66, which the Partnership expects to repay with a combination of proceeds from the private placement of equity and long-term debt. The Partnership will also issue $240 million in new PSXP units to Phillips 66, allocated proportionately between common units and units issued to the general partner to maintain its 2 percent general partner interest.

This is the largest acquisition PSXP has made to date,” said Greg Garland, Phillips 66 Partners chairman and CEO. “The Bakken Pipeline complements our strategy to expand current systems that are integrated with Phillips 66 refineries and terminals, while MSLP provides another reliable source of cash flow generation to the portfolio. This acquisition supports our EBITDA growth objective by adding solid fee-based assets to the Partnership and keeps us on track to deliver our 30 percent distribution growth target. To meet our $1.1 billion of annual run-rate adjusted EBITDA goal by the end of 2018, we do not anticipate accessing the equity market, other than through selective use of our at-the-market program.

The transaction includes interests in the following assets:

  • The Bakken Pipeline, which consists of 1,926 combined pipeline miles and 520,000 barrels per day (“BPD”) of crude oil capacity expandable to 570,000 BPD. There are receipt stations in North Dakota to access Bakken and Three Forks production, a delivery and receipt point in Patoka, Illinois, and delivery points in Nederland, Texas, including the Phillips 66 Beaumont Terminal.
  • MSLP, owner of facilities that process residue from heavy sour crude oil into liquid products and fuel-grade petroleum coke at the Phillips 66 Sweeny Refinery in Old Ocean, Texas. The facilities include a 125,000 BPD capacity vacuum distillation unit and a 70,000 BPD capacity delayed coker unit.

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 comprised solely of independent directors. The conflicts committee engaged Evercore to act as its financial advisor and Vinson & Elkins, L.L.P. to act as its legal counsel.

About Phillips 66 Partners

Headquartered in Houston, Texas, Phillips 66 Partners is a growth-oriented 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.

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