Phillips 66 Partners (NYSE: PSXP) announced that it has received sufficient binding commitments on an initial open season to proceed with construction of the Gray Oak Pipeline system. The Gray Oak Pipeline will provide crude oil transportation from West Texas to destinations in the Corpus Christi and Sweeny/Freeport markets. Origination stations will be constructed in Reeves, Loving, Winkler, and Crane counties in West Texas, as well as from locations in the Eagle Ford production area in South Texas. The pipeline is expected to be placed in service by the end of 2019, and is backed by long-term, third-party, take-or-pay commitments with primarily investment-grade customers.
Gray Oak Pipeline, LLC, a joint venture owned 75 percent by Phillips 66 Partners and 25 percent by Andeavor (NYSE: ANDV), will own the pipeline system. Other third parties, including Enbridge Inc. (TSX, NYSE: ENB), have an option to acquire up to 32.75 percent interest in the joint venture. If all options are exercised, Phillips 66 Partners’ ownership would be 42.25 percent and Andeavor’s ownership would remain 25 percent.
Gray Oak Pipeline, LLC received enough volume commitments in the form of precedent agreements to hold a second binding open season. This open season provides an opportunity for additional shippers to enter into transportation services agreements that provide long-term crude oil transportation on the Gray Oak Pipeline. The ultimate scope and capacity of the pipeline will depend on the outcome of the second open season. Subject to the results of the open season, the Gray Oak Pipeline could transport up to 700,000 barrels per day or more of crude oil from the Permian Basin to downstream markets. Assuming the pipeline is fully subscribed, its capacity could ultimately be expanded to approximately 1 million barrels per day of long-haul takeaway.
In Corpus Christi, the Gray Oak Pipeline will connect to a new joint venture marine terminal under development by Buckeye Partners, L.P. (NYSE: BPL). Buckeye will have a 50 percent interest in the terminal joint venture and will be the operator, while Phillips 66 Partners and Andeavor each will have a 25 percent ownership interest. The terminal will have an initial storage capacity of 3.4 million barrels and is expected to begin operations by the end of 2019.
The Gray Oak Pipeline second open season will commence at 3 p.m. CDT on April 26, 2018. Prior to participating in the open season, interested parties must execute a confidentiality agreement to govern the receipt of the open season documentation. For a form of confidentiality agreement and additional information regarding the Gray Oak Pipeline, please contact Corey Leonard at email@example.com.
About Phillips 66 Partners
Headquartered in Houston, Phillips 66 Partners is a growth-oriented master limited partnership formed by Phillips 66 to own, operate, develop and acquire primarily fee-based crude oil, refined petroleum products and natural gas liquids pipelines and terminals and other transportation and midstream assets. For more information, visit www.phillips66partners.com.
This press release contains forward-looking statements as defined under the federal securities laws, including projections, plans and objectives. Although Phillips 66 Partners believes that expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to be correct. In addition, these statements are subject to certain risks, uncertainties and other assumptions that are difficult to predict and may be beyond Phillips 66 Partners’ control. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, actual results may vary materially from what Phillips 66 Partners anticipated, estimated, projected or expected. The key risk factors that may have a direct bearing on the forward-looking statements are the accuracy of our assumptions used to estimate the timing of permit receipts and the construction schedule, the ultimate number of co-venturers and associated ownership interests, and our ability to successfully construct and integrate the assets into our operations, and other factors as described in the filings that Phillips 66 Partners makes with the Securities and Exchange Commission. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than as described. All forward-looking statements in this release are made as of the date hereof and Phillips 66 Partners undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
This release is intended to be a qualified notice to nominees as provided for under Treasury Regulation Section 1.1446-4(b)(4) and (d). Please note that 100 percent of Phillips 66 Partners LP’s distributions to foreign investors are attributable to income that is effectively connected with a United States trade or business. Accordingly, all of Phillips 66 Partners LP’s distributions to foreign investors are subject to federal income tax withholding at the highest applicable effective tax rate. Nominees, and not Phillips 66 Partners LP, are treated as the withholding agents responsible for withholding on the distributions received by them on behalf of foreign investors.