Genesis Energy, L.P. announced Oct. 25 that it has executed a definitive agreement to purchase Valero Energy Corporation’s indirect 50% equity interest in Cameron Highway Oil Pipeline Company, a partnership, for $330 million in cash.
Enterprise Products Partners, L.P. also owns an indirect 50% interest in and operates Cameron Highway.
“We believe that Cameron Highway is an attractive investment underpinned by the cash flows tied to large, dedicated anchor fields, the majority of which are not yet fully developed, and it has capacity and is geographically positioned to benefit from future midstream service opportunities.”
Cameron Highway, constructed in 2004, is a modern 380-mile 24- and 30-inch diameter pipeline, with capacity to deliver up to 500,000 barrels per day of crude oil from developments in the Gulf of Mexico to major refining markets along the Texas Gulf Coast located in Port Arthur and Texas City.
“Genesis is excited about the opportunity to partner with Enterprise, the largest publicly traded partnership and a leader in offshore midstream infrastructure development,” said Grant Sims, Genesis’ Chief Executive Officer. “This is a very strategic investment for Genesis, and it further complements the integrated midstream services we provide to Gulf Coast producers and refineries and diversifies our asset portfolio. The Gulf of Mexico is an important and growing resource basin, accounting for approximately 30% of total current U.S. oil production, and Cameron Highway is well-positioned to continue serving Gulf of Mexico producers.” Sims continued, “We believe that Cameron Highway is an attractive investment underpinned by the cash flows tied to large, dedicated anchor fields, the majority of which are not yet fully developed, and it has capacity and is geographically positioned to benefit from future midstream service opportunities.”
Enterprise will continue its role as operator of Cameron Highway, overseeing physical operations and maintenance activities.
During the twelve month period ended June 30, 2010, Cameron Highway’s owners received distributions totaling approximately $65 million. Genesis expects such annualized distributions to potentially be significantly higher following resumed development of the fields currently dedicated to the pipeline as well as from Cameron Highway’s ability to provide services to future developments. Genesis intends to finance the transaction with a combination of equity and debt. The acquisition is expected to close before year end, subject to usual and customary conditions including receipt of all regulatory approvals. The purchase price is subject to customary adjustments, including for working capital.