Shell Midstream Partners LP (SHLX) has announced that it has signed an agreement with its general partner to eliminate all incentive distribution rights (IDRs) and economic general partner (GP) interest in SHLX. SHLX has also entered into a purchase and sale agreement with affiliates of its sponsor, Royal Dutch Shell plc (Shell), to acquire Shell’s 79% interest in Mattox Pipeline Company LLC, which owns the Mattox Pipeline, and certain logistics assets at the Shell Norco Manufacturing Complex. As consideration for the assets and the elimination of IDRs, the sponsor will receive 160 million newly issued SHLX common units, plus US$1.2 billion of Series A perpetual convertible preferred units at a price of US$23.63 per unit.
“Today is an important day in our journey as an MLP,” said Kevin Nichols, CEO of Shell Midstream Partners GP LLC. “This transaction positions the Partnership well for the future, simplifying our structure and lowering our cost of capital. Our diversified portfolio continues to deliver sustainable growth – and I’m pleased with the addition of the Mattox Pipeline and Norco logistics assets, which will enhance our strategic position both onshore and offshore.”
The Mattox Pipeline is a 90-mile, 24-in. system with a 300 000 bpd capacity that will move produced crude oil from Appomattox westward to the Proteus and Endymion pipeline systems and then onshore. The Mattox Pipeline is backed by a long-term contract with a monthly minimum quantity (MMQ) at a fixed transportation rate for the Appomattox and Vicksburg fields. The Mattox Pipeline is also strategically located for potential future tie-backs to the Appomattox host, such as Rydberg, Dover, Fort Sumter and other exploration projects. These potential fields are not subject to the MMQ and could present upside in the future.
The Norco logistics assets to be acquired by SHLX consist of certain midstream assets at the Shell Norco Manufacturing Complex and comprise crude, chemicals, intermediate and finished product pipelines, storage tanks, docks, truck and rail racks, and supporting infrastructure. These assets are backed by take-or-pay contracts with wholly owned subsidiaries of Shell with an initial term of fifteen years and an option to extend for an additional five-year term. The acquisition of these manufacturing and chemicals midstream assets builds upon the Partnership’s strategy to access assets across Shell’s broad asset base.
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