Shell Midstream Partners LP (SHLX) said July 1 it closed the dropdown acquisition of interest in an oil pipeline serving Texas and Louisiana markets.

The Houston company bought a 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a subsidiary of Shell Oil Products US, for $350 million.

The deal marks the second acquisition by Shell Midstream following its IPO, said Peggy Montana, member of the board of directors of the general partner, in the release.

"As previously communicated, we have begun to introduce new assets into the MLP in order to diversify our cash flow base and highlight the sizeable inventory of assets at our sponsor," Montana said.

Highlights:

  • Proprietary (non-FERC) 367-mile offshore crude oil pipeline with 350,000 barrels per day capacity transporting to key markets in Texas and Louisiana;
  • Ownership of strategic platform South Marsh Island 205; and
  • Access to major crude trading hubs via connecting carriers including Gibson/Houma to St James, La., and Clovelly, La., and via Cameron Highway Oil Pipeline System to Texas Hubs (Texas City, Port Arthur).

"Poseidon is a key corridor pipeline for producers with close proximity to existing and future developments in the Central and Western Gulf of Mexico to serve both Texas and Louisiana markets," Montana said. "Poseidon's strong growth profile makes the asset a highly valuable addition to the Shell Midstream Partners' portfolio."

The acquisition price, including a proportional share of Poseidon debt, reflects and roughly 9.5 times multiple of the asset's forecasted next 12 months adjusted EBITDA plus capacity reserve payments. The acquisition is expected to be immediately accretive to unitholders.

The acquisition was funded with borrowings under Shell Midstream's revolving credit facilities.

In addition to the acquisition, Shell Midstream entered into a new one-year revolving credit facility with $100 million of initial availability with an affiliate, increasing total borrowing capacity to $500 million.

The terms of the acquisition were approved by the conflicts committee of board of directors of Shell Midstream's general partner, which is comprised entirely of independent directors. Evercore Group LLC was financial adviser and Andrews Kurth LLP was legal adviser.