February 28, 2011 [Kinder Morgan] - Kinder Morgan Energy Partners, L.P. announced an acquisition and the formation of a crude oil joint venture with Deeprock Energy Resources LLC and Mercuria Energy Trading, Inc. in Cushing, Okla.
KMP is investing approximately $25 million for a 50 percent stake in an existing crude oil tank farm that has storage capacity of 1 million barrels and for the construction of three new storage tanks that will have an incremental storage capacity of 750,000 barrels. The new tanks are expected to be in service third quarter 2011. Deeprock will remain the construction manager and will continue to operate the terminal. Mercuria will remain the anchor tenant for this capacity for the next five years with an option to extend. Additionally, KMP has entered into a development agreement with Deeprock that gives KMP an option to participate in future expansions on Deeprock’s remaining 254 acres of undeveloped land.
“This joint venture with Deeprock and Mercuria, in conjunction with our recently announced investment in the WATCO rail company, creates a great platform for future expansions in this key crude oil market,” said KMP Terminals President Jeff Armstrong. The transaction is expected to be immediately accretive to cash distributable to KMP unitholders.
“Deeprock Energy is very excited for the opportunity to partner with Kinder Morgan and Mercuria. We look forward to the ongoing business relationships and to expanding our crude oil storage business opportunities with Kinder Morgan,” said Glenn Collum, Deeprock Energy Resources LLC Managing Member.
“Mercuria is pleased to enter this storage joint venture with valued partners Kinder Morgan and Deeprock in which Mercuria will continue to receive, store and trade crude oil in Cushing. This further investment in the business will also give Mercuria the potential to utilize additional storage tanks and truck rack expansions for our trading business,” said METI President Michael Redenbaugh.
Deeprock Energy Resources LLC is a privately owned Oklahoma company that has been very active in the recent expansion of the Cushing OK market. Deeprock is comprised of employees with over 126 cumulative years of experience in oil and gas construction, gathering and transportation, operations, safety, accounting and auditing.
Mercuria is a privately-owned international group of companies active over a wide spectrum of global energy markets including crude oil and refined petroleum products, natural gas (including LNG), power, coal, biodiesel, vegetable oils and carbon emissions. It is one of the world’s five largest independent energy traders and has a longstanding sector expertise. Mercuria’s worldwide operations are carried out from 28 offices across five continents.
Kinder Morgan Energy Partners, L.P. (NYSE: KMP) is a leading pipeline transportation and energy storage company in North America. KMP owns an interest in or operates more than 28,000 miles of pipelines and 180 terminals. Its pipelines transport natural gas, gasoline, crude oil, CO2 and other products, and its terminals store petroleum products and chemicals and handle such products as ethanol, coal, petroleum coke and steel. KMP is also the leading provider of CO2 for enhanced oil recovery projects in North America. One of the largest publicly traded pipeline limited partnerships in America, KMP has an enterprise value of over $33 billion. The general partner of KMP is owned by Kinder Morgan, Inc. (NYSE: KMI). Combined, KMI and KMP have an enterprise value of approximately $55 billion.
