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Phillips 66 Partners acquires rail-unloading services and more

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Bayway and Ferndale rail-unloading facilities

On October 22, 2014, Phillips 66 Partners (PSXP) announced that it was acquiring two newly constructed crude oil rail-unloading facilities from Phillips 66 (PSX) for $330 million.

These facilities are located in Linden, New Jersey, and Ferndale, Washington. They service PSX’s Bayway and Ferndale refineries, respectively.

The Bayway rail-unloading facility, located within the Phillips 66 Bayway refinery, commenced operations in August 2014. It has a capacity of 75,000 bpd (barrels per day) and can unload crude from 120 railcars at the same time.

The Ferndale rail-unloading facility, located adjacent to the Phillips 66 Ferndale refinery, commenced operations in November 2014. It has a capacity of 30,000 bpd and can unload 54 railcars at the same time.

In its press release, PSXP notes that it’s entering into ten-year terminal services agreements with PXP for 100% of the available capacity of the rail-unloading facilities.

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Cross-Channel Connector

The transaction also includes the Cross-Channel Connector project, which connects PSXP’s Pasadena terminal with Kinder Morgan’s (KMI) Pasadena terminal at the Houston Ship Channel.

PSXP plans to undertake a new organic project to utilize the Cross-Channel Connector assets. This project will provide shippers access from the Pasadena terminal to third-party systems located north of the Houston Ship Channel. These pipelines are slated to have an initial capacity of up to 180,000 bpd and are expected to commence operations by 2Q2015.

PSXP is a component of the Global X MLP & Energy Infrastructure ETF (MLPX) and the First Trust North American Energy Infrastructure Fund (EMLP). For its part, PSX is a component of the Energy Select Sector SPDR Fund (XLE) and the Vanguard Energy ETF (VDE).

Key advantages of the transaction

  • PSXP can take advantage of the increasing quantities of the price-advantaged crude (Bakken) being transported by rail and overcome challenges presented by limited pipeline capacities
  • ten-year commitments mean stable cash flows
  • minimal capex for maintenance and related expenditures is required

The following part of this series looks at PSXP’s stock performance over the past year.

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