Shell Midstream Partners, a Houston-based master limited partnership formed by Shell, has entered into a purchase and sale agreement to acquire Shell’s ownership interest in Amberjack Pipeline Company LLC, which is comprised of 75% of Amberjack Series A and 50% of Amberjack Series B for $1.22 billion.
“I’m pleased to announce our largest acquisition to date. This is a significant milestone for Shell Midstream Partners,” said Kevin Nichols, Chief Executive Officer. “The Amberjack pipeline is strategically located to capture value in a prolific area in the Gulf of Mexico and represents another key corridor that is set to benefit from organic growth.”
“This acquisition, combined with our equity raise earlier in the year, further demonstrates our ability to deliver against our promises and positions us well for the future.”
Shell Midstream Partners’ share of Amberjack’s annualized net income estimated using the second quarter of 2018 forecast is nearly $120 million with the second quarter dividend estimated to be about $34 million.
Following the completion of anticipated growth projects, Shell Midstream Partners’ share of Amberjack’s net income is expected to increase to an annual run rate of approximately $145 million by the end of 2018 with an associated quarterly dividend of approximately $40 million.
Shell Midstream Partners plans to fund this acquisition with borrowings under existing credit facilities. The acquisition is expected to close on or around May 11, 2018, subject to customary closing conditions.
The pipeline currently transports roughly 300,000 barrels per day due to the success of Jack St. Malo and Tahiti fields located in the Gulf of Mexico. The pipeline is forecasted to transport approximately 400,000 barrels per day by the end of 2019 from continued in-field development, as well as new projects expected to come online.
According to Shell Midstream Partners, the pipeline has “exceptional” connectivity in the Gulf of Mexico with delivery options along the Texas and Louisiana Gulf Coast.
Also, Shell Midstream Partners said, shippers on Amberjack can deliver into multiple pipelines allowing for the transportation of four different crude grades. This optionality is a significant value driver for shippers as they can leverage arbitrage opportunities between crude grades and delivery locations, the company said.