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Global Energy Advisory - 16th March 2018

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Phillips 66 Partners To Buy Phillips 66 Assets In $2.4B Deal


Phillips 66 Partners (NYSE:PSXP), the master limited partnership of Phillips 66, said on Friday that it would buy assets from Phillips 66 (NYSE:PSX) in a deal valued at US$2.4 billion including debt, in the largest acquisition the partnership has ever made.

Oil firms in the U.S. form master limited partnerships (MLPs) to buy and operate midstream assets. MLPs distribute excess cash to unitholders in the form of tax-deferred dividends.

Phillips 66 Partners has reached a deal with Phillips 66 to buy the refiner’s 25-percent stake in each of Dakota Access LLC and Energy Transfer Crude Oil Company LLC, collectively called the ‘Bakken Pipeline’. The partnership is also buying Phillips 66’s 100-percent stake in Merey Sweeny, LP (MSLP)—the owner of fuel-grade coke processing units at the Phillips 66 Sweeny Refinery in Old Ocean, Texas.

The deal, expected to close early next month, would be immediately accretive to the partnership and its unitholders, Phillips 66 Partners said in its statement.

The total US$2.4-billion value of the acquisition includes US$625 million in proportional non-consolidated, non-recourse Bakken Pipeline debt, as well as US$100 million of MSLP debt.

The partnership plans to fund the asset acquisition via a combination of debt, proceeds from a private placement of equity units, and partnership units issued to Phillips 66.

Related: Can Oil Prices Hit $60 In 2018?

For this purpose, the partnership also announced today that it would proceed with a private placement of US$750 million Series A Perpetual Convertible Preferred Units and US$300 million Common Units. The MLP will use part of the net proceeds from the offering to fund the acquisition, and the remaining proceeds for general partnership purposes, including the funding of future acquisitions and organic projects and repayment of outstanding debt.

“This is the largest acquisition PSXP has made to date,” Greg Garland, Phillips 66 Partners chairman and CEO said. “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,” Garland noted. 

 By Tsvetana Paraskova for Oilprice.com

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