An operator in midstream and downstream oil and gas business, Delek Logistics Partners, LP DKL announced that its subsidiaries have acquired a crude oil storage tank and rail offloading racks from subsidiaries of Delek US Holdings, Inc. DK, a downstream oil and gas operator.
Delek Logistics executed the transaction worth $61.9 million in cash, financing the deal through available cash and borrowings under its revolving credit facility.
Assets Acquired
Crude Oil Storage Tank – Constructed in 2014, this storage tank is located adjacent to Delek US Holding’s refinery in Tyler, TX. This tank has approximately 350,000 barrels of shell capacity that supports its refinery in Texas.
Rail Offloading Facility – The rail offloading racks are located adjacent to Delek US’ refinery in El Dorado, AR, which was constructed in 2012. The properties consist of two crude oil unloading racks that facilitate its El Dorado refinery to obtain up to 25,000 barrels per day (bbl/d) of light crude oil or up to 12,000 bbl/d of heavy crude oil or some combination of the two.
Synergies
Delek Logistics considers these assets to be immediately accretive to its earnings and add approximately $6.7 million to its EBITDA annually. Moreover, the partnership is positive that through this acquisition, it will be able to achieve its targeted EBITDA of $150 million in 2015.
Recent Pipeline Ventures
Brentwood, TN-based, Delek Logistics recently inked two partnership deals, one with Plains All American Pipeline, L.P. PAA and the other with Rangeland Energy. Both joint ventures are aimed at constructing logistics assets to serve third parties and subsidiaries of Delek US. Combined investment in the projects for Delek Logistics will amount to an approximate $91 million.
Delek Logistics and Plains All American have a 50-50 partnership to construct the 80-mile long, 12-inch wide Caddo Pipeline. The pipeline will stretch from Plains All American’s Atlas Terminal in Longview, TX to Shreveport, LA and is expected to carry up to 80,000 barrels of domestic light-sweet crude oil per day (read: Plains All-Delek Logistics to Build Crude Oil Pipeline).
The second deal is inked with Rangeland Energy, a midstream company that caters to the infrastructure needs of crude oil marketers. Delek Logistics will own a 33% interest in the joint venture. Together, they will construct the RIO Pipeline, a 12-inch, 107-mile pipeline originating in north Loving County, TX near the Texas-New Mexico border and terminating in Midland, TX. This pipeline will have a capacity of 55,000 bbl/d with the provision to expand up to 85,000 bbl/d or more.
Investment in these projects will no doubt boost the partnerships’ bottom line and assist upstream operators to transport higher volumes of oil to the end market.
Zacks Rank
Delek Logistics currently carries a Zacks Rank #3 (Hold). Valero Energy Partners LP VLP is a better-ranked stock in the midstream oil and gas space, carrying a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment