Buckeye Partners L.P. (BPL) has agreed to buy 33 refined petroleum products terminals and nearly 1,000 miles of refined petroleum products pipelines from BP Products North America Inc., a wholly owned subsidiary of BP Plc (BP). Buckeye Partners will pay $225 million to the British oil major for these assets.
The refined products terminals to be acquired by Buckeye Partners have a current storage capacity of over 10 million barrels. As a part of the acquisition of pipelines Buckeye Partners will gain 50% interest in BP’s Inland Corporation, pending approval of Inland’s shareholders.
Buckeye’s acquisition of interests in Inland represents about $60 million of the total purchase price. Buckeye expects to close this acquisition in the second quarter of 2011.
The proposed acquisition is a part of Buckeye’s continued expansion and geographic diversification efforts. Located in the Midwestern, Southeastern, and Western United States, these assets further extend Buckeye’s operations in new and key geographic markets. The partnership expects the acquisition to immediately perk up its distributable cash flow.
Additionally, Buckeye said that it has identified several opportunities for further commercial development of these assets and anticipate a smooth integration and rapid realization of operating synergies with existing assets.
On the other hand, the sale of BP assets stems from its divestiture plans to pay for the Gulf oil spill. Over the past year, BP has struck several deals to raise money to cover costs related to the oil spill in the Gulf of Mexico.
The British oil company expects to pay nearly $40 billion to compensate for the spill. In addition to suspending its dividend and selling bonds, the company has sold off nearly $22 billion in assets. It plans to shed up to $30 billion in company assets by the end of 2011.
Based in Houston, Texas, Buckeye Partners, L.P. primarily operates pipeline systems for refined petroleum products in the United States. Buckeye Partners currently retains a Zacks #3 Rank (short-term Hold rating). We maintain our long-tern Neutral rating on the stock.
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