Phillips 66 Partners (NYSE: PSXP) said April 24 it has received sufficient binding commitments on an initial open season to proceed with construction of the Gray Oak Pipeline system. The Gray Oak Pipeline will provide crude oil transportation from West Texas to destinations in the Corpus Christi and Sweeny/Freeport markets.
Origination stations will be constructed in Reeves, Loving, Winkler, and Crane counties in West Texas, as well as from locations in the Eagle Ford production area in South Texas.
The pipeline is expected to be placed in service by the end of 2019, and is backed by long-term, third-party, take-or-pay commitments with primarily investment-grade customers.
Gray Oak Pipeline, LLC, a joint venture owned 75% by Phillips 66 Partners and 25% by Andeavor (NYSE: ANDV), will own the pipeline system. Other third parties, including Enbridge Inc. (NYSE: ENB), have an option to acquire up to 32.75% interest in the joint venture. If all options are exercised, Phillips 66 Partners’ ownership would be 42.25% and Andeavor’s ownership would remain 25%.
Gray Oak Pipeline, LLC received enough volume commitments in the form of precedent agreements to hold a second binding open season. This open season provides an opportunity for additional shippers to enter into transportation services agreements that provide long-term crude oil transportation on the Gray Oak Pipeline. The ultimate scope and capacity of the pipeline will depend on the outcome of the second open season.
Subject to the results of the open season, the Gray Oak Pipeline could transport up to 700,000 barrels per day or more of crude oil from the Permian Basinto downstream markets. Assuming the pipeline is fully subscribed, its capacity could ultimately be expanded to approximately 1 million barrels per day of long-haul takeaway.
In Corpus Christi, the Gray Oak Pipeline will connect to a new joint venture marine terminal under development by Buckeye Partners, L.P. (NYSE: BPL). Buckeye will have a 50% interest in the terminal joint venture and will be the operator, while Phillips 66 Partners and Andeavor each will have a 25% ownership interest. The terminal will have an initial storage capacity of 3.4 million barrels and is expected to begin operations by the end of 2019.
The Gray Oak Pipeline second open season will commence at 3 p.m. CDT on April 26, 2018. Prior to participating in the open season, interested parties must execute a confidentiality agreement to govern the receipt of the open season documentation.
Recommended Reading
Matador Stock Offering to Pay for New Permian A&D—Analyst
2024-03-26 - Matador Resources is offering more than 5 million shares of stock for proceeds of $347 million to pay for newly disclosed transactions in Texas and New Mexico.
Kimmeridge Fast Forwards on SilverBow with Takeover Bid
2024-03-13 - Investment firm Kimmeridge Energy Management, which first asked for additional SilverBow Resources board seats, has followed up with a buyout offer. A deal would make a nearly 1 Bcfe/d Eagle Ford pureplay.
Laredo Oil Subsidiary, Erehwon Enter Into Drilling Agreement with Texakoma
2024-03-14 - The agreement with Lustre Oil and Erehwon Oil & Gas would allow Texakoma to participate in the development of 7,375 net acres of mineral rights in Valley County, Montana.
Todd Holdco to Invest Further into Northcliff Resources
2024-01-24 - Todd Holdco will acquire 37,333,333 common shares in Northcliff at CA$0.01875 (US$ 0.014) per common share.
Chesapeake Slashing Drilling Activity, Output Amid Low NatGas Prices
2024-02-20 - With natural gas markets still oversupplied and commodity prices low, gas producer Chesapeake Energy plans to start cutting rigs and frac crews in March.