Pacific Energy Partners, L.P. Announces the Closing of the Acquisition of Certain Terminal and Pipeline Assets from Valero L.P.
September 30 2005 - 7:03PM
Business Wire
Pacific Energy Partners, L.P. (NYSE:PPX) ("Pacific") announced the
closing today of the acquisition, by two of its wholly-owned
subsidiaries, of certain terminal and pipeline assets from Valero
L.P. (NYSE:VLI). The contract purchase price of the assets was $455
million, plus closing costs and the assumption of certain
environmental and other operating liabilities. The terminals and
pipeline system being acquired by Pacific from Valero L.P. include:
-- West Coast Terminals in the San Francisco, California area - The
Martinez Terminal and the Richmond Terminal, which have
approximately 4.1 million barrels of combined refined products and
crude oil storage capacity. -- East Coast Terminals in the
Philadelphia, Pennsylvania area - The North Philadelphia Terminal,
the South Philadelphia Terminal and the Paulsboro, New Jersey
Terminal, which have a combined refined products storage capacity
of 3.1 million barrels. -- West Pipeline System in the U.S. Rocky
Mountain region - This system consists of 550 miles of refined
products pipeline extending from Casper, Wyoming east to Rapid
City, South Dakota and south to Colorado Springs, Colorado. The
system includes products terminals at Rapid City, South Dakota,
Cheyenne, Wyoming, and Denver and Colorado Springs, Colorado with a
combined storage capacity of 1.7 million barrels. "We are extremely
pleased to complete this acquisition, which provides Pacific with
high quality, strategically located assets and establishes a
platform for near term and future growth in the refined products
business. These premium assets provide both asset class and
geographic diversity and are stable, fee-based assets with no
direct commodity price exposure," stated Irv Toole, President and
Chief Executive Officer of Pacific. "Pacific's management team has
already taken steps to promptly and efficiently integrate these
assets with Pacific's existing operations. As previously announced,
we expect the transaction to be immediately accretive to cash
available for distribution to our limited partners. We expect to
invest about $15 million for growth initiatives over the next
twelve months and forecast EBITDA from these assets for full year
2006 of approximately $42 million. Capital additions totaling
approximately $25 million to be undertaken in 2007 and 2008 are
expected to provide significant additional accretion." Curt
Anastasio, President and Chief Executive Officer of Valero L.P.,
stated, "Divesting these assets on favorable terms is great news
for our unitholders because we plan to use the proceeds from the
divestiture to pay down debt, strengthen our balance sheet and
position the partnership for future growth opportunities. It's also
great news for the employees and the community because Pacific
Energy Partners, L.P., is a good company with a strong commitment
to safety and the environment. And they have committed to hiring
all employees and providing them with comparable pay, benefits and
employment opportunities. For all of these reasons, this is a
win-win situation for everyone." Management of Pacific is expected
to recommend to its Board of Directors an increase in its cash
distribution of $0.12 per limited partner unit annually, or $0.03
per quarter. This increase, if approved, would be payable in
February 2006, for the fourth quarter of 2005. With this increase
associated with the Valero L.P. asset acquisition, as well as an
additional $0.05 per limited partner unit annually, or $0.0125 per
quarter, associated with the start-up of Pacific's initiating
synthetic crude oil facility in Edmonton, the increased cash
distribution rate would equal an annual rate of $2.22 per limited
partner unit, an 8.3% increase over the current cash distribution
rate. In connection with the closing of the acquisition, Pacific
also closed today the previously announced private placement of 4.3
million common units and a new $400 million, five-year revolving
credit facility. Due to completion in September 2005 of the
previously announced public equity offering of 5.2 million common
units and a private placement of $175 million of senior unsecured
notes, Pacific did not utilize a $300 million 364-day credit
facility commitment and, accordingly, the commitment expired. About
Pacific: Pacific Energy Partners, L.P. is a master limited
partnership headquartered in Long Beach, California. Pacific is
engaged in the business of gathering, transporting, storing and
distributing crude oil, refined products and other related products
in California, the Rocky Mountain region, including Alberta,
Canada, and the East Coast. Pacific generates revenues by
transporting such commodities on its pipelines and by leasing
capacity in its storage facilities. Pacific also buys, blends and
sells crude oil, activities that are complementary to its crude
pipeline operations. For additional information about Pacific,
please visit our website at www.PacificEnergy.com. About Valero
L.P.: Valero L.P. is a master limited partnership based in San
Antonio, with 9,150 miles of pipeline, 94 terminal facilities and
four crude oil storage facilities. One of the largest terminal and
independent petroleum liquids pipeline operators in the nation, the
partnership has terminal facilities in 25 U.S. states, Canada,
Mexico, the Netherlands Antilles, the Netherlands, Australia, New
Zealand and the United Kingdom. The partnership's combined system
has approximately 77.6 million barrels of storage capacity, and
includes crude oil and refined product pipelines, refined product
terminals, petroleum and a specialty liquids storage and
terminaling business, as well as crude oil storage tank facilities.
For more information, visit Valero L.P.'s web site at
www.valerolp.com. This news release may include "forward-looking"
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. All statements other than statements of
historical fact included or incorporated herein may constitute
forward-looking statements. Although Pacific believes that the
forward-looking statements are reasonable, it can give no assurance
that such expectations will prove to be correct. The estimates
associated with the acquisition are based on facts known at the
time of estimation and Pacific's assessment of the ultimate
outcome. The achievement of the forecast 2006 EBITDA is dependent
on many factors, including the timely construction and leasing of
additional storage tanks. The forward-looking statements involve
risks and uncertainties that may affect Pacific's operations and
financial performance. Among the factors that could cause results
to differ materially are those risks discussed in Pacific's filings
with the Securities and Exchange Commission, including its Annual
Report on Form 10-K for the year ended December 31, 2004. EBITDA is
used as a supplemental performance measure by management and by
external users of Pacific's financial statements, such as
investors, commercial banks, research analysts and rating agencies,
to assess: (i) the financial performance of the partnership's
assets without regard to financing methods, capital structures or
historical cost basis; (ii) the ability of the partnership's assets
to generate cash sufficient to pay interest cost and support the
partnership's indebtedness; (iii) Pacific's operating performance
and return on capital as compared to those of other companies in
the midstream energy sector, without regard to financing and
capital structure; and (iv) the viability of projects and the
overall rates of return on alternative investment opportunities.
EBITDA is not a generally accepted accounting principle ("GAAP")
financial measure and should not be considered as an alternative to
net income, income before taxes, cash flows from operating
activities, or any other measure of financial performance presented
in accordance with GAAP. EBITDA is not intended to represent cash
flow. Pacific's EBITDA may not be comparable to EBITDA or similarly
titled measures of other companies. Pacific is forecasting 2006
cash flow from operating activities, for the acquired assets, of
$31 million, based on its projected EBITDA of $42 million less
projected interest expense of $11 million from the debt component
of the financing for the acquisition. Interest expense will vary
for many reasons, including general market conditions. Cash flow
from operating activities is a GAAP financial measure.
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