US-based Tallgrass Energy Partners (TEP) is to acquire an additional 31.3% interest in Tallgrass Pony Express pipeline for $743.6m from Tallgrass Development.
With the latest acquisition, TEP will increase its interest in the 760-mile long Pony Express crude pipeline to 98% from the existing 66.7%.
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Tallgrass president and CEO David Dehaemers Jr said: "This acquisition demonstrates our continued commitment to execute on our strategic plan to grow TEP and increase the cash distributions to our unitholders, even in challenging capital market conditions.
"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."
TEP said it will pay Tallgrass Development $475m in cash and 6.518 million in common units to acquire the stake.
The company plans to fund the cash consideration through borrowings under its revolving credit facility, which is increased from $1.1bn to $1.5bn with regard to the transaction.
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By GlobalDataUnder the deal, Tallgrass Development will grant an 18-month call option to TEP to repurchase the newly issued 6.518 million common units for $42.50.
The crude oil Tallgrass Pony Express pipeline runs from Guernsey, Wyoming, to the US oil hub of Cushing, Oklahoma, and can transport 320,000 barrels of oil per day (bbl/d).
The pipeline connects oil plays such as the Bakken, the Powder River Basin and the Niobrara Shale to markets across the country.
Image: TEP will acquire the stake in the pipeline by paying $475m. Photo: courtesy of puttsk/ FreeDigitalPhotos.net.
