March 18, 2011 [OPIS] - Targa Resources Partners said that, through its wholly owned subsidiary, Coast Energy Group LLC, it has acquired a refined petroleum products and crude oil storage and terminaling facility in Channelview, Texas. The company did not specify the cost of the terminal purchase, but industry sources told OPIS that the deal was worth $29 million or about $50 per shell barrel.
The price was said to be steep, given that a new terminal could be built for the same price, they said.
Also, the terminal was primarily used by the previous owner Flex Tank Systems as a lube oil processing facility for the past eight to nine years. It occasionally takes in crude.
The existing terminal does not have any clean products tanks, but it may change if Targa decides to convert the dirty tanks with added costs.
The terminal also has limitations in barge and tanker loading capability due to a 12-foot vessel draft.
Targa officials were not available for comment.
This is the first petroleum storage asset to be owned by Targa, which is primarily a partnership engaged in the natural gas and natural gas liquids businesses. Targa is actively negotiating other refined products and crude storage and terminaling acquisition opportunities that could be consummated this year. If Targa were to acquire these properties, the company would also generate fee-based income and potentially provide organic growth opportunities.
The partnership owns an extensive network of integrated gathering pipelines and gas processing plants and currently operates along the Louisiana Gulf Coast, accessing the Coastal and offshore region of Louisiana, the Permian Basin in West Texas and Southeast New Mexico and the Fort Worth Basin in North Texas. Located on Carpenter’s Bayou along the Houston Ship Channel, the Channelview oil terminal can handle multiple grades of blend stocks, products and crude. The transaction was paid entirely with cash funded through borrowings under the partnership’s senior secured revolving credit facility. Total value of the transaction is below the Hart-Scott-Rodino Act (“HSR”) minimum.
“This acquisition enables us to apply our current terminaling expertise to an expanded product slate on a long term fee basis and enhances the partnership’s cash flow mix and geographical footprint,” said Rene Joyce, chief executive officer of Targa Resources Corp.
“We expect to invest incremental growth capital in the near future to expand the capacity of the terminal supported by new long term contracts,”Joyce added. The Channelview terminal has approximately 544,000 bbl of storage capacity and contains blending and heating capabilities, tanker truck and barge loading and unloading infrastructure.
Currently, the capacity is 100% leased to customers that include a multi- national oil company and regional refineries.
