Sunoco Logistics Partners L.P. has recently entered into an agreement with Switzerland-based energy trading giant, Vitol Inc., to purchase Permian Basin crude oil unit from the latter. The transaction value is of $760 million plus working capital. The deal, which will expand Sunoco Logistics’ footprint in a region that continues to be profitable even at the current low prices, is expected to close in the fourth quarter of 2016, subject to certain closing conditions and regulatory approvals.
The proposed transaction includes a crude oil terminal in Midland with a capacity of around 2 million barrel as well as a crude oil gathering and mainline pipeline system in the Midland Basin. Moreover, Sunoco will acquire 50% stake in Vitol’s joint venture – SunVit Pipeline LLC. The latter connects the Midland terminal to the partnership’s Permian Express 2 pipeline, thereby supplying Permian crude to various markets.
In connection with this buyout, the parent companies of Sunoco Logistics’ general partner – Sunoco Partners – namely Energy Transfer Partners (ETP - Free Report) and Energy Transfer Equity (ETE - Free Report) have agreed to reduce the incentive distributions by total of $60 million over a two-year period.
In order to fund this deal, Sunoco Logistics announced public offering of 21,000,000 common units. The partnership has extended a 30-day option for underwriters to purchase up to 3,150,000 additional common units. The offering has been priced at $27.00 per unit. Per Sunoco Logistics, the net proceeds from this offering will be utilized for general partnership purposes, if the acquisition falls through.
SUNOCO LOGISTIC Price
Philadelphia-based Sunoco Logistics, a master limited partnership, acquires, owns, and operates a geographically diverse portfolio of refined product and crude oil pipelines and terminal facilities.
Sunoco Logistics currently carries a Zacks Rank #3 (Hold), which implies that the stock will perform in line with the broader U.S. equity market over the next one to three months.
A better-ranked player in the broader energy sector is Enbridge Inc. (ENB - Free Report) . The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the last four quarters, Enbridge posted an average positive earnings surprise of 4.8%.
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