Tallgrass Energy Partners, LP (ticker: TEP) announced today two strategic acquisitions by its Tallgrass Terminals business and several significant commercial developments that expand services offered by Pony Express in key crude oil producing basins it serves.
“Today’s announcements, along with last week’s news of the five-year contract extension with Pony Express’ largest customer, continue to solidify Pony Express’ track record as a reliable and diverse pipeline and strengthens its ability to serve crude oil markets for decades to come,” said Tallgrass Energy President and CEO David G. Dehaemers Jr. “With news of increasing crude oil production in basins Pony Express serves, we’re even more confident that utilization of our pipeline will continue to increase in the future.”
Crude oil terminals
Pawnee Terminal
Tallgrass Terminals, LLC has entered into an agreement to acquire a 51% membership interest in the Pawnee, Colo. crude oil terminal from Zenith Energy for approximately $31 million. The Pawnee Terminal is an injection point for the Tallgrass Pony Express Northeast Colorado Lateral (NECL), with 300,000 barrels of storage and backed by minimum volume commitments of approximately 90,000 BPD.
The Pawnee Terminal will provide commercial and operational synergies with Pony Express and offers the potential for incremental sourcing opportunities such as directly connecting nearby producers. Tallgrass Terminals expects the transaction to close in Q1 2018, subject to certain closing conditions.
Deeprock Development expansion
In addition, Tallgrass Terminals has acquired a 38% interest in Deeprock North, LLC, which owns a crude oil terminal in North Cushing, Oklahoma, immediately adjacent to the Deeprock Development, LLC crude oil terminal facility. The purchase price for the interest was $19.5 million or approximately eight times current cash flow. Immediately following the acquisition, Deeprock North was merged into Deeprock Development.
After the acquisition and merger, Deeprock Development now owns a larger and more diverse terminal complex with total storage capacity of 4.0 million barrels. Tallgrass Terminals owns approximately 60% of the combined entity and retains significant strategic and commercial control.
Pony Express commercial updates and developments
Platteville open season
Pony Express recently concluded a successful binding open season to secure committed shipper contracts for crude oil transportation of a new common stream on the Platteville Extension. The open season resulted in additional unaffiliated third-party commitments of 10,000 BPD for a total of 37,500 BPD of short-haul and long-haul binding transportation commitments.
The 55-mile Platteville Extension is approximately 60% complete and expected to begin operations in April 2018, with the associated Grasslands Terminal expected to be in service in Q4 2018. The initial capacity of the Platteville Extension will be approximately 40,000 BPD, increasing to approximately 80,000 BPD once the Grasslands Terminal is in service.
Two new refinery connections
Construction on the Holly Frontier El Dorado and CHS McPherson are complete, with line fill and commercial service expected in early January 2018 for both.
Once the two new refinery connections are in service, Pony Express shippers will be able to deliver more than 300,000 BPD to three significant refineries directly connected to Pony Express, including the currently connected refinery in Ponca City, Oklahoma.
New supply connection
Tallgrass Terminals recently signed a 10-year take-or-pay agreement for 8,000 BPD from a new customer to support the construction of a terminal in the Central Kansas Uplift. Construction of the terminal is progressing on schedule, with completion and in-service expected by March 2018.
Upon completion, the terminal facilities will have delivery capabilities of approximately 20,000 BPD into the Pony Express mainline, providing the opportunity to accommodate incremental volumes from the Central Kansas Uplift.
Upon completion of these projects, Pony Express will have six different supply sources and five different crude oil streams capable of being batched on the system.
