Shell Midstream Partners has signed an agreement to increase its interest in two US-based pipelines, namely Explorer Pipeline Company and Colonial Pipeline Company, in an $800m deal.
According to the agreement, Shell Midstream Partners will acquire Shell’s 25.97% equity interest in Explorer and 10.125% equity interest in Colonial.
Following the completion of the deal, Shell Midstream Partners’ interests in Explorer and Colonial will respectively increase to 38.59% and 16.125%.
Shell Midstream Partners CEO Kevin Nichols said: “This acquisition is evidence of our strategy in action – we will continue to build scale with diversified assets that provide robust, ratable cash flows.
“The Explorer and Colonial systems have the capacity to deliver some three million barrels per day of refined products, providing energy to key demand centres of the US.”
Shell Midstream Partners is a master limited partnership formed by Shell to own, operate, develop and acquire pipelines and other midstream assets.
The company will fund the acquisition with a 75% debt through a credit facility with Shell and a 25% equity placement to Shell Midstream LP Holdings.
Anticipated to be immediately accretive to unitholders, the transaction will provide strategic access to growing advantaged refined products supply from the Gulf Coast, the firm noted.
Explorer is a petroleum products transporter catering to consumers in 16 states.
The company has a 1,830-mile pipeline that can carry 660,000bpd of gasoline, diesel, fuel oil and jet fuel.
Colonial is a refined products pipeline that runs from Houston, Texas, to New York harbour.
The pipeline sources supply from 29 refineries and deliver to more than 260 terminals.
Subject to regulatory approval and other closing conditions, the completion of the deal is expected to take place in the second quarter of this year.
Shell Midstream Partners owns pipelines, crude tank storage and terminal systems. The company transports crude oil production to Gulf Coast and Midwest refining markets. It also delivers refined products from Gulf Coast markets to key demand centres.