Bakken Pipeline Project Acquires New Partners, Potential Shipper

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The Bakken Pipeline project has been a joint venture between Energy Transfer Partners L.P. (NYSE: ETP) and Sunoco Logistics Partners L.P. (NYSE: SXL) until Wednesday morning’s announcement that the two firms have agreed to sell a 36.75% stake in the project to a joint venture of Marathon Petroleum Corp. (NYSE: MPC) and Enbridge Energy Partners L.P. (NYSE: EEP). The sale price is $2 billion in cash, of which Energy Transfer will receive $1.2 billion and Sunoco Logistics will receive $800 million.

Proceeds of the sale will be used to pay down debt and help fund current growth projects. Energy Transfer and Sunoco Logistics have arranged a $2.5 billion project financing facility for the Bakken Pipeline project that is expected to meet all the capital necessary to complete the project. Following the transaction’s close, all four owners of the Bakken Pipeline project “will participate on a pro rata basis for any incremental capital needs to complete the project.” The transaction is expected to close in the third quarter of this year.

Energy Transfer and Sunoco Logistics formed a joint venture called Bakken Holdings that own a 75% stake in Dakota Access LLC and Energy Transfer Crude Oil Co. (ETCO), the two firms that are developing and will own and operate the project which consists of about 1,172 miles of new 30-inch crude oil pipeline to carry more than 470,000 barrels a day of crude from North Dakota to Patoka, Illinois, and more than 700 miles of converted pipeline from Patoka to Nederland, Texas.

Bakken Holdings is selling 49% of is 75% stake in the project to the Marathon-Enbridge join venture MarEn Bakken. When the transaction is completed, Bakken Holdings will own 38.25% of the project, MarEn will own 36.75% and wholly owned subsidiaries of Phillips 66 (NYSE: PSX) will maintain their existing 25% ownership in the project. Sunoco Logistics will be the operator of the pipeline.

The best news for the project may be that Marathon Petroleum has agreed to participate in the forthcoming open season for the Dakota Access/ETCO pipeline, and “subject to the terms and conditions of the open season, make a long-term commitment on the Bakken Pipeline Project.” The new open season is expected to be initiated in the third quarter.

Common units of Energy Transfer Partners traded up more than 8% Wednesday morning, at $41.63 in a 52-week range of $18.62 to $51.23. The consensus 12-month price target is $43.36.

Units of Sunoco Logistics rose about 4.5% to trade at $29.04, in a 52-week range of $15.43 to $37.50. The consensus price target is $33.53.

Shares of Marathon Petroleum traded up more than 2%, at $39.66 in a 52-week range of $29.24 to $59.99. The 12-month price target is $47.77.

Units of Enbridge Energy traded up more than 4%, at $22.87 in a 52-week range of $14.27 to $29.99. The 12-month price target estimate is $23.60.

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