U.S. pipeline operator Magellan Midstream Partners LP is exploring the sale of a 35% stake in its Longhorn crude oil pipeline in Texas for as much as $2 billion, four people familiar with the matter said June 25.
The move would make Magellan the latest in a string of U.S. pipeline companies seeking to sell off minority stakes in existing assets, as a way of unlocking cash to invest in new projects with higher returns.
Magellan is working with investment banks to sell the 35% stake in a new business unit which will contain the Longhorn pipeline and some storage assets on the Gulf of Mexico coast, according to the sources who spoke on condition of anonymity as the information is confidential.
Magellan would continue to own the remainder, the sources added. The company is currently marketing the stake to long-term financial investors such as infrastructure and pension funds, three of the sources said, with one adding the final bids were expected to be lodged next month.
The newly-created unit, in which the stake is to be sold, has 12-month EBITDA of between $400 million and $500 million, according to the sources.
A spokesman for Magellan said: "We are pleased with our existing assets and our strong financial profile. While we are always open to opportunities to optimize our portfolio, we can't speak to any particular rumors that may be in the marketplace."
The 275,000-barrel-per-day Longhorn pipeline transports crude from the West Texas part of the Permian Basin to refining and export facilities in Houston.
Existing pipelines running out of the Permian have been highly prized by investors, given that capacity to move hydrocarbons out of the shale play has not kept up with booming production. Some of this takeaway problem is set to be alleviated in the next two years, as new projects come online.
This is not the first time that Magellan has sought to sell a stake in one of its existing assets.
Last August, Magellan and Plains All American Pipeline LP said they would sell a 50% interest in the BridgeTex Pipeline Co. for $1.44 billion to the infrastructure arm of Canadian pension fund OMERS.
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