Enterprise Products Partners strengthens crude oil and natural gas dominance with Oilantking Partners purchase.
Enterprise Products Partners has recently announced that the company has acquired the general partner and related incentive distribution rights, 15,899,802 common units and 38,899,802 subordinated units in Oiltanking Partners L.P. held by Oiltanking Holding Americas, Inc.
Enterprise has was reported to have a total consideration of approximately $4.41 billion to Oiltanking Holding and this is comprised of $2.21 billion in cash and 54,807,352 Enterprise common units. It has also been reported that Enterprise has also paid $228 million to assume notes receivable issued by Oiltanking Partners.
Upon the payment of the Oiltanking Partners’ distribution along with the third quarter of 2014, ordination period with respect to the Oiltanking Partners subordinated units will end.
Enterprise submitted a proposal to the conflicts committee of the general partner of Oiltanking Partners to merge Oiltanking Partners with and into Enterprise. Under the terms of the proposal, Enterprise would exchange 1.23 Enterprise common units for each Oiltanking Partners common unit. This proposed consideration represents an at-market value for Oiltanking Partners common units based upon the volume weighted average trading prices of Oiltanking Partners and Enterprise on September 30, 2014. The total consideration for this proposal would be $1.4 billion. The total consideration for step 1 and step 2, as proposed, would be approximately $6.0 billion.
Michael A. Creel, chief executive officer of the general partner of Enterprise said in an exclusive interview “We are pleased to announce this two-step transaction that would result in the merger of Oiltanking Partners into Enterprise.” Mr. Creel also mentioned “We have had a strategic relationship and enjoyed mutual growth with Oiltanking Partners and its predecessors since 1983. The combination of Enterprise’s system of midstream assets and Oiltanking Partners’ access to waterborne markets and crude oil and petroleum products storage assets would extend and broaden Enterprise’s midstream energy services business. This combination would benefit our producing and consuming customers by enhancing their respective access to supplies, domestic and international markets, and storage.”
Mr. Creel finally mentioned “We believe there would be three principle avenues for long-term value creation from the merger of Oiltanking Partners into Enterprise: (1) at least $30 million of synergies and cost savings from the complete integration of Oiltanking Partners’ business into Enterprise’s system; (2) opportunities for new business and repurposing existing assets for ‘best use’ to meet the growing demand for export and logistical services for petroleum products related to the increase in North American crude oil, condensate and NGL production from the shale and non-conventional plays; and (3) securing ownership and control of Oiltanking Partners’ assets that are essential to our midstream business. We believe the acquisition of Oiltanking Partners would be accretive to Enterprise’s distributable cash flow per unit beginning in 2016,”
Enterprise believes that this acquisition will be very attractive to public holders of Oiltanking Partners common units. This would allow Oiltanking Partners unitholders to participate in the future growth of Enterprise’s businesses (including Oiltanking Partners’ existing business), the company’s substantial backlog of capital projects and access to a much larger, more diversified asset base. It would also allow Oiltanking Partners unitholders to benefit from Enterprise’s flexibility of its financial investments, high investment grade credit rating and easy access to capital markets.
The transaction was based on a proposed exchange rate, public unitholders of Oiltanking Partners would each get a 70 percent increase in cash distributions based on the respective cash distributions per unit paid by Enterprise and Oiltanking Partners in August 2014 which is also based on the second quarter of 2014. As of the time being, Enterprise does not intend to comment further on discussions unless and until a definitive agreement is reached. Details of definitive agreement between the two companies will be delivered soon
About Enterprise Products Partners
Enterprise Products Partners L.P. is an American natural gas and crude oil pipeline company headquartered in Houston, Texas. Oiltanking Partners owns marine terminals on the Houston Ship Channel and the Port of Beaumont with a total of twelve ship and barge docks and approximately 24 million barrels of crude oil and petroleum products storage capacity on the Texas Gulf Coast. Enterprise Products Partners stock market evolution: http://www.bloomberg.com/quote/EPD:US
About Michael A. Creel
Mr. Creel was elected CEO and a director of Enterprise GP in November 2010 and served as President of Enterprise GP from November 2010 until February 2013.
About Oiltanking Partners
Oiltanking Partners is a publicly-traded master limited partnership engaged in independent storage and transportation of crude oil, refined petroleum products and liquefied petroleum gas. The company provides services to a variety of customers, including major integrated oil companies, distributors, marketers and chemical and petrochemical companies. Oiltanking Partners stock market evolution: http://finance.yahoo.com/q?s=OILT