Plains All American and Oryx Midstream Holdings LLC, a portfolio company of Stonepeak Infrastructure Partners, today announced they have entered into a definitive agreement to merge their respective assets, operations and commercial activities within the Permian Basin into a newly formed strategic joint venture, Plains Oryx Permian Basin LLC.
The transaction will include all of Oryx's Permi-an assets and, with the exception of Plains' long-haul pipeline systems and certain of its intrabasin terminal assets, the vast majority of Plains' assets located within the Permian Basin.
Joint venture summary:
- Significant value for customers via in-creased connectivity, operational flexibility, and access to markets.
- Highly complementary Permian Basin as-sets, capabilities, and long-term business models.
- JV Ownership: 65% Plains/35% Oryx (governance consistent with ownership interests).
- Plains will serve as operator of the JV.
- A Joint Operating Committee that includes representatives from Plains and Oryx will provide oversight on material JV operating and commercial decisions.
- JV will be consolidated into PAA's financial statements.
- Near-term free cash flow accretive to Plains and Oryx.
- Cashless transaction, debt-free JV entity.
- Durable JV structure, attractive in any reasonable oil price environment.
"This is a very positive announcement for Plains, Oryx and our Permian Basin customers," said Willie Chiang, Chairman and CEO of Plains All American. "This joint venture is a natural combination and logical next step to optimising our highly complementary systems. Structured as a debt-free JV entity through a cashless transaction, this aligns with Plains' financial and portfolio optimisation strategies, is near-term free cash flow accretive to Plains and Oryx, and reinforces Plains' ability to maximise free cash flow for our investors, while enhancing our overall credit profile."
"Since our team started Oryx in late 2013, we have been committed to being a leading strategic partner to our customers and to building a world-class system in the Permian," said Brett Wiggs, Chief Executive Officer of Oryx. "This combination is a natural evolution of the Oryx growth story and perpetuates that commitment, creating the premier crude oil logistics system in the basin, increasing connectivity, enhancing reliability, and strengthening efficiencies for our customers. We look forward to partnering with Plains and are confident that Plains Oryx Permian Basin will continue to grow and provide producers with the best solutions in the region. Finally, I would like to personally thank every employee of Oryx for their incredibly important roles in the development, construction, operation and management of this great company. I have no doubt they will continue to do the same for Plains Oryx Permian Basin."
The Plains assets comprising a part of the JV include approximately 3900 miles of pipeline and related operational storage capacity located within the Permian Basin, long-term acreage dedication and marketing agreements covering approximately 2.8 million acres, and supply and facilities dedications. Plains' long-haul pipeline systems and certain of its intra-basin terminal assets will not be included within the JV.
The Oryx assets comprising a part of the JV include approximately 1600 miles of pipeline and related operational storage capacity located within the Permian Basin, in addition to long-term acreage dedication and marketing agreements covering approximately 1.3 million acres.
The JV provides for an overall ownership and distribution sharing arrangement of 65% Plains and 35% Oryx. The parties have agreed to a tiered modified distribution sharing arrangement (‘MSA’) for up to 10 years.
Sidley Austin LLP is representing Stonepeak Infrastructure Partners and Oryx, a portfolio company of Stonepeak Infrastructure Partners, in a joint venture with Plains All American of their respective Permian Basin assets, operations and commercial activities. The newly formed joint venture will be Plains Oryx Permian Basin LLC.
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