Valero Energy Partners buys assets from parent company

The oil-focused limited partnership will pay $154m for assets held by subsidiaries of its parent company, Valero Energy Corporation.

Valero Energy Partners (VEP) has agreed to buy assets from subsidiaries of its parent company, Valero Energy Corporation, for a total of $154 million.

The assets to be acquired include the McKee Crude System in Sunray, Texas; the Three River Crude System in the Eagle Ford shale region, South Texas; and the Wynnewood Products System in Ardmore, Oklahoma.

The drop-down transaction, expected to close on July 1, is to be funded with Valero Energy Partners’ cash on hand, the company said in a statement.

“The acquisition is our first step in executing our growth strategy and is consistent with previously communicated growth plans,” said Joe Gorder, chairman and chief executive officer of VEP.

Upon closing, the firm plans to enter into 10-year term transportation and terminaling agreements with subsidiaries of Valero, according to the statement.

These agreements are due to contain minimum throughput volume commitments that account for approximately 90 percent of expected throughput volumes, while the acquired assets are expected to contribute approximately $15.4 million of EBITDA in their first full year of operation.

The McKee Crude System has 72,000 barrels per day of throughput capacity and supplies approximately 40 percent of the crude oil processed at Valero's McKee refinery. The system consists of more than 200 miles of pipelines, 20 crude oil truck unloading sites with lease automatic custody transfer units, and approximately 240,000 barrels of storage capacity.

The Three Rivers Crude System consists of 11 crude oil truck unloading sites with lease automatic custody transfer units and a 1-mile, 12-inch pipeline with a capacity of 110,000 barrels per day that delivers crude oil to tanks at Valero's Three Rivers refinery. The system also receives locally produced crude oil via connections to the Harvest Arrowhead pipeline system and the Plains Gardendale pipeline for processing at the Three Rivers refinery or for shipment through third-party pipelines to Valero's two refineries in Corpus Christi, Texas.

The Wynnewood Products System consists of a 30-mile, 12-inch refined petroleum products pipeline with 90,000 barrels per day of capacity and two tanks with a total of 180,000 barrels of storage capacity. The system connects Valero's Ardmore refinery to the Magellan refined products pipeline system and is the primary distribution outlet for the refinery.