Magellan Midstream Partners LP, a refined petroleum products distributor, on July 13 agreed to acquire oil storage and pipeline assets from BP Pipelines Inc., a unit of embattled oil giant BP Plc, for $289 million. As part of the deal, the company will acquire 7.8 million barrels of crude oil storage and more than 100 miles of active petroleum pipelines from BP Pipelines in North America.
Magellan expects the deal to be immediately accretive to the partnership's distributable cash flow per unit, with the potential for additional growth in cash flow from the assets over time.
The acquisition will also provide the company with nearly 40 miles of crude oil pipelines between Houston and Texas City, Texas, varying in size between 24 and 26 inches in diameter.
"This acquisition leverages Magellan's expertise in transporting and storing petroleum products by greatly expanding our crude oil logistics infrastructure and our energy footprint in the attractive Cushing, Okla., and Houston, Texas markets," said Don Wellendorf, chief executive officer of Magellan.
The assets will facilitate Magellan's strategy of developing its existing East Houston terminal into a key distribution point for crude oil to Gulf Coast refineries by improving its connectivity within the Houston market and extending their reach to the Texas City refining region.
Analysts had expected BP to sell some of its assets to raise cash to deal with the Gulf oil spill. According to media reports, the company is in talks to sell $18 billion worth of assets to U.S. oil and gas company Apache Corp.
BP has announced a package of measures, including the creation of a $20 billion fund to fulfill certain obligations arising from its oil and gas spill in the U.S. Gulf. The oil giant so far spent more than $3.5 billion on cleanup and damages.
According to media reports, Magellan and BP were in talks regarding the pipeline sale for several months, well before the April 20 rig explosion responsible for the oil spill.
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