Energy Transfer, Sunoco Announce Team Up in Permian Basin JV

Energy Transfer and Sunoco LP have entered in a joint venture agreement that combines some of their crude oil and produced water gathering assets in the Permian Basin, the companies said July 16.

The JV will operate more than 5,000 miles of crude oil and water gathering pipelines with crude oil storage capacity in excess of 11 MMbbl. The JV’s reach will extend from Colorado City, Texas, in Mitchell County, through the Midland Basin and into the heart of the Delaware Basin, Lea County, New Mexico.

News of the comes a day after Energy Transfer completed its acquisition of WTG Midstream Holdings in a cash-and-stock trade valued at $3.18 billion.

Energy Transfer will serve as the operator of the JV and contribute its Permian crude oil and produced water gathering assets and operations to the partnership. Energy Transfer’s long-haul crude pipeline network provides transportation of crude oil out of the Permian Basin to Nederland, Houston and Cushing is excluded from the joint venture.

Sunoco, coming off its May deal to buy NuStar Energy for $7.3 billion, will contribute all of its Permian crude oil gathering assets and operations to the JV.

Energy Transfer will hold a 67.5% interest in the joint venture with Sunoco holding a 32.5% interest.

The formation of the joint venture has an effective date of July 1 and is expected to be immediately accretive to distributable cash flow per LP unit for both Energy Transfer and Sunoco.

Intrepid Partners LLC served as financial adviser to Energy Transfer’s conflicts committee, and Potter Anderson & Corroon LLP acted as Delaware counsel.

Guggenheim Securities LLC served as financial adviser to Sunoco’s special committee. Richards, Layton & Finger, P.A. acted as Delaware counsel for Sunoco’s special committee.

Vinson & Elkins LLP and Akin Gump Strauss Hauer & Feld LLP also acted as legal counsel to the partnerships on the transaction.