Newspaper article THE JOURNAL RECORD

Tulsa-Based Magellan Acquires Petroleum Storage, Pipelines for $289 Million

Newspaper article THE JOURNAL RECORD

Tulsa-Based Magellan Acquires Petroleum Storage, Pipelines for $289 Million

Article excerpt

Magellan Midstream Partners LP said Tuesday it will spend $289 million to expand its crude oil logistics and energy footprint in the Cushing and Houston markets, acquiring 7.8 million barrels of crude oil storage and more than 100 miles of active petroleum pipelines from BP Pipelines of North America Inc.

The move is expected to aid the development of Magellan's East Houston terminal into a key distribution point.

Magellan also announced the company plans to sell 5 million units in a registered public offering and use the proceeds to pay a portion of the purchase price.

"To avoid the increasing saturation of Midwest markets, crude must move south from Cushing to the Houston refining complex," said Don Wellendorf, Magellan CEO, during a conference call. "Most of that construction will focus along the mainline route. We believe the BP system offers the most attractive means to distribute crude in the Houston market."

The deal has been in the pipeline for months, Wellendorf said.

Negotiations were going on well before the April 20 rig explosion responsible for the oil spill, said BP spokeswoman Sheila Williams.

While BP is selling all its tank storage in the Cushing market, it negotiated a multi-year use agreement, said Wellendorf. The agreement comes as BP mulls a number of options to raise cash to deal with the Gulf oil spill. Other reported talks include a potential $10 billion asset sale to U.S. independent oil and gas producer Apache Corp. The company has spent more than $3 billion on cleanup and damages so far, and it has agreed to set aside another $20 billion for future damage claims.

"This acquisition leverages Magellan's expertise in transporting and storing petroleum products," said Wellendorf. "These assets will facilitate our strategy to develop our existing East Houston terminal into a key distribution point for crude oil to Gulf Coast refineries by improving Magellan's connectivity within the Houston market and extending our reach to the Texas City refining region."

Magellan's partnership units finished the day trading up 9 cents or 0.19 percent at $48.24. The units are up 39 percent in the past year. Volume of shares traded was 934,645, nearly three times the daily average of 316,192.

Magellan expects the acquisition, expected to close within 60 days, to add to earnings immediately. Prior to acquisition closing, the partnership intends to apply some or all of the proceeds to repay borrowings under its revolving credit facility, with the balance to be used for general partnership purposes. …

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