Sunoco Logistics Partners L.P. (SXL), a master limited partnership, has agreed to acquire an oil storage plant in New Jersey from Sunoco Inc. (SUN) in a stock deal, for approximately $100 million. Additionally, Sunoco Logistics plans to invest about $90 million for further development and legal obligations of the facility.
Located in Westville, the Eagle Point Tank Farm, although idle since the fall of 2009, includes five million barrels of active storage for clean products and dark oils. The storage capacity of the unit is expandable.
As elucidated by the official of Sunoco Logistics, this purchase will assist in the transportation and distribution of various types of fuels to markets. Along with the company’s existing pipeline network, dock space and refined products rack at Eagle Point, this facility will act as a major terminal operational point on the East Coast, which has excellent export-import opportunities.
In a separate development, Sunoco Logistics has entered into a deal with ConocoPhillips (COP) to buy a refined products terminal located in East Boston, Massachusetts. The purchase price of the property has been settled at $56 million plus the fair market value of inventory. The company plans to utilize the borrowing under revolving credit facilities to finance the transaction.
Under a long-term contract, the terminal – comprising a storage capacity of approximately 1.2 million barrels – serves the Logan International Airport exclusively. This acquisition is expected to widen Sunoco Logistics’ regional as well as customer base.
Both transactions, pending customary closing conditions, will likely be completed in the third quarter of 2011.
Philadelphia-based Sunoco Logistics acquires, owns and operates a geographically diverse portfolio of refined products and crude oil pipelines and terminal facilities. The partnership operates in three segments –– Refined Products Pipeline System, Terminal Facilities and the Crude Oil Pipeline System.
We believe that Sunoco Logistics with its stable fee-based revenue, geographically diverse assets and strong business fundamentals will be able to generate steady earnings in the coming months.
However, the uncertain economic environment, low demand for refined products and cost overruns on expansion projects compel us to maintain our long-term Neutral rating on the stock.
