Tallgrass to acquire additional stake in Pony Express Pipeline in US
Tallgrass Energy Partners will acquire an additional 31.3% interest in Tallgrass Pony Express Pipeline in the US for about $743.6m from Tallgrass Development.
The 760-mile long crude pipeline runs from Guernsey, Wyoming, to Cushing, Oklahoma.
Under the terms of the deal, Tallgrass Energy Partners will acquire the additional stake by paying $475m in cash and 6.52 million in common units to Tallgrass Development.
Tallgrass said that the acquisition is a part of its effort to increase the cash distributions to unitholders despite 'challenging capital market conditions'.
Tallgrass president and CEO David Dehaemers said: "The attractive acquisition multiple, the inclusion of equity consideration and other favorable terms of the purchase agreement showcase the supportive nature of TEP's relationship with Tallgrass Development."
With the acquisition, TEP's stake in the Pony Express pipeline increases to 98%.
As part of the deal, an 18 month call option is also being offered by Tallgrass Development to repurchase the newly issued 6.518 million common units at a price of $42.50.
Dehaemers added: "Consistent with our first two Pony Express acquisitions, we expect this transaction to be immediately accretive to unitholders and intend to recommend that our board of directors increase our quarterly distribution for the first quarter of 2016 by at least $0.06 per unit over our distribution of $0.64 per unit for the fourth quarter of 2015.
"We continue to affirm our previous distribution growth guidance of approximately 20% annually from 2015 through 2017."
Designed to transport 320,000 barrels of oil per day, the Pony Express Pipeline links major oil plays including Bakken, Powder River Basin and Niobrara Shale with markets in the US.
Image: Tallgrass plans to increase the cash distributions to unitholders. Photo: courtesy of puttsk/ FreeDigitalPhotos.net.