A Kansas City area pipeline firm, Tallgrass Energy Partners, LP announced two strategic acquisitions totalling nearly $50 million by its Tallgrass terminals that will eventually mean more oil flowing into one of its northern Oklahoma refineries.
Tallgrass Terminals LLC is buying 51 percent membership interest in the Pawnee, Colorado crude oil terminal from Zenith Energy for $31 million. The Pawnee Terminal is an injection point for the Tallgrass Pony Express Northeast Colorado Lateral with 300,000 barrels of storage and backed by minimum volume commitments of nearly 90,000 barrels a day.per day. The deal should be finalized in the first quarter of 2018.
Tallgrass Terminals also acquired a 38 percent 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 was $19.5 million or nearly 8 times current cash flow.
The company announcement indicated that immediately following the acquisition, Deeprock North was merged into Deeprock Development.
“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 David G. Dehaemers Jr., Tallgrass Energy President and Chief Executive Officer. “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.”
After the acquisition and merger, Deeprock Development now owns a larger and more diverse terminalling complex with total storage capacity of 4.0 million barrels. Tallgrass Terminals owns approximately 60 percent of the combined entity and retains significant strategic and commercial control. Tallgrass expects the acquisition to enhance and expand Tallgrass Terminals’ commercial offerings for both Pony Express customers and other customers in Cushing.
In late December 2017, Pony Express shippers nominated more than 10 million barrels, or approximately 325,000 barrels per day for movements in January 2018. If realized, this would constitute the largest per-day average during a single month in Pony Express’ history. Tallgrass affiliates account for only about 5 percent of the nominated volumes.
Construction on the Holly Frontier El Dorado and CHS McPherson, Kan. refinery connections is 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 barrels per day to three significant refineries directly connected to Pony Express, including the currently connected refinery in Ponca City, Okla.
As previously announced, Tallgrass Terminals has a signed, 10-year take-or-pay agreement for 8,000 barrels per day 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 terminalling facilities will have delivery capabilities of approximately 20,000 barrels per day 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.