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. …