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USD Partners announces terminal acquisition

Published by , Editorial Assistant
Tanks and Terminals,

USD Partners LP (the partnership) has announced its acquisition of a crude oil terminal in Stroud, Oklahoma, (the Stroud terminal) to facilitate rail-to-pipeline shipments of crude oil from the Partnership’s Hardisty terminal in Western Canada to the Cushing, Oklahoma, crude oil hub (the Cushing hub). As part of the transaction, the partnership has extended the term of take-or-pay terminalling services agreements related to 25% of the Hardisty terminal’s available capacity by approximately one year.

Concurrent with the acquisition, the partnership entered into a new multi-year, take-or-pay terminalling services agreement with an investment grade rated, multi-national energy company (the Stroud customer) for the use of approximately 50% of the Stroud terminal’s available capacity. The term of this agreement is scheduled to begin on 1 October 2017, and to conclude on 30 June 2020.

The all-in US$25 million purchase price represents approximately 2.5x the estimated 2018 Adjusted EBITDA to be generated by the 33-month take-or-pay contract with the Stroud customer and includes approximately US$2.2 million of one-time costs and anticipated growth capital expenditures to retrofit the Stroud terminal to handle heavy grades of Canadian crude oil. The transaction is expected to be accretive to the partnership’s 2018 and 2019 distributable cash flow per limited partner unit. The partnership funded the transaction with available capacity on its revolving credit facility.

“We are proud to announce the successful repositioning of an underutilised asset to create a competitive network solution for our new customer’s growing oil sands production,” said Dan Borgen, the Partnership’s Chief Executive Officer. “Our Hardisty to Stroud rail solution delivers immediate takeaway capacity, preserves the integrity of our customer’s heavy barrels and enables substantial end market optionality at Cushing with available pipeline capacity to the Gulf Coast.”

“This transaction reinforces the strategic positioning of our Hardisty asset and confirms our long-held view that rail will continue as an important component of midstream transportation infrastructure in Western Canada,” said Jim Albertson, Vice President, Commercial Development – Canada. “We expect the pairing of the Stroud destination terminal with our advantaged origination terminals will drive additional commercial opportunities, particularly as we approach another cycle where growing crude oil production from Western Canada will exceed available takeaway capacity.”

The partnership also obtained a lease for 300 000 bbls of crude oil tank storage at the Cushing hub to receive outbound shipments of crude oil from the Stroud terminal.

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