February 10, 2012 [OPIS] - Buckeye Partners has agreed to acquire Chevron's marine terminal facility in Perth Amboy, N.J. for some $260-million in cash. The complex has more than 4- million bbl of storage, four docks, and plenty of acreage for expansion. It handles cargo, barge, pipeline, rail, and truck access and lies just six miles from Buckeye's Linden, N.J. complex. The deal is expected to close in the second quarter.
Buckeye president and chief executive officer Clark Smith called the deal a “milestone” acquisition, and indeed the deal had been rumored in East Coast terminaling circles for some time. However, credit agencies have questioned Buckeye’s very aggressive and expensive expansion in recent years, and there are issues as to how the company will be able to get a significant return on its investment.
Sources believe that Perth Amboy may become a very popular destination for European gasoline cargoes headed to the northeast in the wake of refinery closures in Pennsylvania and the Virgin Islands. There had been talk that Valero might look to purchase the storage complex, since it will be moving cargoes from its Pembroke, Wales, U.K. refinery to the East Coast.
Buckeye says it will transform the Chevron facility, known mostly for handling asphalt and distillate, into “a highly efficient, multi-product storage, blending and throughput facility through the investment of approximately $200-million to $225-million over the next three years.
“We expect to realize significant commercial and operational synergies by adding a marine terminal in New York Harbor to our existing pipeline and terminal assets in the region,” added Mr. Smith. “The Perth Amboy facility will allow Buckeye to play an integral role in connecting waterborne imports with end-destination markets beyond New York Harbor. We expect the transaction, which is supported by multi-year storage, blending, and throughput commitments from Chevron, to be accretive to distributable cash flow per unit in 2013.”
Robert A. Malecky, senior vice president of Buckeye and president of Buckeye’s domestic pipelines and terminals business unit, noted that Buckeye intends to expand its capabilities to serve the Northeast markets through the construction of a new 16″ pipeline between the Perth Amboy facility and Buckeye’s Linden, NJ complex and an expansion of Buckeye’s existing pipelines running from Linden, NJ into the Pennsylvania and New York markets.
Read the full press release here.
