Shell Midstream Partners LP (NYSE: SHLX) agreed to acquire additional assets from subsidiaries of Royal Dutch Shell Plc (NYSE: RDS.A), the Houston-based company said May 5.
The $630 million dropdown includes the acquisition of 100% interest in the Refinery Gas Pipelines, Delta Pipeline and Na Kika Pipeline. Shell Midstream said it intends to fund the acquisition with a combination of borrowings under existing credit facilities and cash on hand.
The deal was the company's first dropdown from outside of Shell Pipeline Co., which "highlights the expansive set of assets from Shell that could eventually make their way into the MLP," according to Tudor, Pickering, Holt & Co. (TPH).
Shell has previously indicated more than $3 billion of EBITDA (TPHe about $25 billion of value) to drop down to Shell Midstream, TPH said in a May 8 report. Shell Midstream has acquired $2.3 billion of assets since 2015.
Highlights of the acquired assets:
- Refinery Gas Pipelines include a network of about 100 miles of gas pipeline connecting multiple refineries and plants operated along the Gulf Coast to Shell Chemical sites, including Shell’s Norco refinery and Deer Park refinery. The pipelines transport a mix of methane, NGL and olefins.
- Delta Pipeline consists of a roughly 130-mile onshore pipeline aggregating volumes from five offshore pipelines including Shell Midstream Partners’ Odyssey Pipeline and the Na Kika Pipeline. This acquisition connects offshore oil production in the eastern corridor of the Gulf of Mexico to key onshore markets.
- Na Kika Pipeline is comprised of a roughly 80-mile offshore pipeline anchored by the Na Kika platform which serves as a host to eight different subsea fields and connects to the Delta Pipeline at Main Pass 69.
The terms of the acquisition were approved by the conflicts committee of the board of directors of the Shell Midstream's general partner, which is comprised entirely of independent directors. The committee was advised by Evercore Group LLC as to financial matters and Andrews Kurth Kenyon LLP as to legal matters.
Shell Midstream said it expects the dropdown acquisition to close by May 10, subject to customary closing conditions.
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