Why is Oiltanking Partners merging with Enterprise Products?

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Nov. 20 2020, Updated 11:11 a.m. ET

OILT benefits

Pursuant to the successful completion of phase II of the merger, Enterprise Products Partners (EPD) will acquire Oiltanking Partners’ (OILT) 100% ownership. The most immediate benefit to OILT unitholders is that they can participate in EPD’s growth. EPD has a number of projects that it expects to yield solid returns.

The most imminent benefit to OILT will come from EPD’s Seaway Crude Pipeline expansion, which it completed recently. Under this expansion, the Jones Creek to ECHO lateral is a 65-mile pipeline completed In January 2014. The ECHO to Port Arthur Lateral, a 95-mile pipeline running from ECHO to Beaumont–Port Arthur, completed in August 2014. This Seaway project is awaiting upstream pipeline connections.

Below is a description of EPD’s other projects in the pipeline.

Read Part 4 of this series to learn what these projects mean for OILT.

EPD has a very diversified asset base. It’s present in the entire range of midstream operations, as opposed to OILT’s primary focus on marine transportation. This will diversify revenue stream and reduce risks, benefiting OILT unitholders.

The merger of EPD and OILT is also expected to accelerate EPD’s increased activity on OILT’s assets. In 2015, EPD expects to increase the loading rate at the fully refrigerated LPG export facility to 16,000 BPH (barrels per hour) from 14,000 BPH earlier.

In 2016, EPD expects to increase this further to 27,000 BPH, or an ~85% increase from the current capacity.

Key deals

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Among some other recently proposed acquisitions in the energy MLP space, Williams Companies (WMB) has proposed to acquire Access Midstream Partners (ACMP) for $5.99 billion. In May 2014, Enbridge Energy Partners, L.P., (EEP) announced that it would acquire natural gas transportation, gathering and processing assets from affiliates of Enbridge Inc. (ENB), its general partner, for $929 million. Some of these companies are components of the Alerian MLP ETF (AMLP).

Check out WMB’s proposed acquisition of ACMP here.

Outlook

All the benefits of the EPD-OILT integration will result in higher distributions to unitholders. Read the next part of this series to learn what financial benefits you can expect from the proposed merger.

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