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Pacific Energy Partners, L.P. (NYSE:PPX) ("Pacific")
announced the closing today of the acquisition, by two of its
wholly-owned subsidiaries, of certain terminal and pipeline assets
from Valero L.P. (NYSE:VLI). The contract purchase price of the assets
was $455 million, plus closing costs and the assumption of certain
environmental and other operating liabilities.
The terminals and pipeline system being acquired by Pacific from
Valero L.P. include:
-- West Coast Terminals in the San Francisco, California area -
The Martinez Terminal and the Richmond Terminal, which have
approximately 4.1 million barrels of combined refined products
and crude oil storage capacity.
-- East Coast Terminals in the Philadelphia, Pennsylvania area -
The North Philadelphia Terminal, the South Philadelphia
Terminal and the Paulsboro, New Jersey Terminal, which have a
combined refined products storage capacity of 3.1 million
barrels.
-- West Pipeline System in the U.S. Rocky Mountain region - This
system consists of 550 miles of refined products pipeline
extending from Casper, Wyoming east to Rapid City, South
Dakota and south to Colorado Springs, Colorado. The system
includes products terminals at Rapid City, South Dakota,
Cheyenne, Wyoming, and Denver and Colorado Springs, Colorado
with a combined storage capacity of 1.7 million barrels.
"We are extremely pleased to complete this acquisition, which
provides Pacific with high quality, strategically located assets and
establishes a platform for near term and future growth in the refined
products business. These premium assets provide both asset class and
geographic diversity and are stable, fee-based assets with no direct
commodity price exposure," stated Irv Toole, President and Chief
Executive Officer of Pacific. "Pacific's management team has already
taken steps to promptly and efficiently integrate these assets with
Pacific's existing operations. As previously announced, we expect the
transaction to be immediately accretive to cash available for
distribution to our limited partners. We expect to invest about $15
million for growth initiatives over the next twelve months and
forecast EBITDA from these assets for full year 2006 of approximately
$42 million. Capital additions totaling approximately $25 million to
be undertaken in 2007 and 2008 are expected to provide significant
additional accretion."
Curt Anastasio, President and Chief Executive Officer of Valero
L.P., stated, "Divesting these assets on favorable terms is great news
for our unitholders because we plan to use the proceeds from the
divestiture to pay down debt, strengthen our balance sheet and
position the partnership for future growth opportunities. It's also
great news for the employees and the community because Pacific Energy
Partners, L.P., is a good company with a strong commitment to safety
and the environment. And they have committed to hiring all employees
and providing them with comparable pay, benefits and employment
opportunities. For all of these reasons, this is a win-win situation
for everyone."
Management of Pacific is expected to recommend to its Board of
Directors an increase in its cash distribution of $0.12 per limited
partner unit annually, or $0.03 per quarter. This increase, if
approved, would be payable in February 2006, for the fourth quarter of
2005. With this increase associated with the Valero L.P. asset
acquisition, as well as an additional $0.05 per limited partner unit
annually, or $0.0125 per quarter, associated with the start-up of
Pacific's initiating synthetic crude oil facility in Edmonton, the
increased cash distribution rate would equal an annual rate of $2.22
per limited partner unit, an 8.3% increase over the current cash
distribution rate.
In connection with the closing of the acquisition, Pacific also
closed today the previously announced private placement of 4.3 million
common units and a new $400 million, five-year revolving credit
facility. Due to completion in September 2005 of the previously
announced public equity offering of 5.2 million common units and a
private placement of $175 million of senior unsecured notes, Pacific
did not utilize a $300 million 364-day credit facility commitment and,
accordingly, the commitment expired.
About Pacific:
Pacific Energy Partners, L.P. is a master limited partnership
headquartered in Long Beach, California. Pacific is engaged in the
business of gathering, transporting, storing and distributing crude
oil, refined products and other related products in California, the
Rocky Mountain region, including Alberta, Canada, and the East Coast.
Pacific generates revenues by transporting such commodities on its
pipelines and by leasing capacity in its storage facilities. Pacific
also buys, blends and sells crude oil, activities that are
complementary to its crude pipeline operations. For additional
information about Pacific, please visit our website at
www.PacificEnergy.com.
About Valero L.P.:
Valero L.P. is a master limited partnership based in San Antonio,
with 9,150 miles of pipeline, 94 terminal facilities and four crude
oil storage facilities. One of the largest terminal and independent
petroleum liquids pipeline operators in the nation, the partnership
has terminal facilities in 25 U.S. states, Canada, Mexico, the
Netherlands Antilles, the Netherlands, Australia, New Zealand and the
United Kingdom. The partnership's combined system has approximately
77.6 million barrels of storage capacity, and includes crude oil and
refined product pipelines, refined product terminals, petroleum and a
specialty liquids storage and terminaling business, as well as crude
oil storage tank facilities. For more information, visit Valero L.P.'s
web site at www.valerolp.com.
This news release may include "forward-looking" statements within
the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
All statements other than statements of historical fact included or
incorporated herein may constitute forward-looking statements.
Although Pacific believes that the forward-looking statements are
reasonable, it can give no assurance that such expectations will prove
to be correct. The estimates associated with the acquisition are based
on facts known at the time of estimation and Pacific's assessment of
the ultimate outcome. The achievement of the forecast 2006 EBITDA is
dependent on many factors, including the timely construction and
leasing of additional storage tanks. The forward-looking statements
involve risks and uncertainties that may affect Pacific's operations
and financial performance. Among the factors that could cause results
to differ materially are those risks discussed in Pacific's filings
with the Securities and Exchange Commission, including its Annual
Report on Form 10-K for the year ended December 31, 2004.
EBITDA is used as a supplemental performance measure by management
and by external users of Pacific's financial statements, such as
investors, commercial banks, research analysts and rating agencies, to
assess: (i) the financial performance of the partnership's assets
without regard to financing methods, capital structures or historical
cost basis; (ii) the ability of the partnership's assets to generate
cash sufficient to pay interest cost and support the partnership's
indebtedness; (iii) Pacific's operating performance and return on
capital as compared to those of other companies in the midstream
energy sector, without regard to financing and capital structure; and
(iv) the viability of projects and the overall rates of return on
alternative investment opportunities. EBITDA is not a generally
accepted accounting principle ("GAAP") financial measure and should
not be considered as an alternative to net income, income before
taxes, cash flows from operating activities, or any other measure of
financial performance presented in accordance with GAAP. EBITDA is not
intended to represent cash flow. Pacific's EBITDA may not be
comparable to EBITDA or similarly titled measures of other companies.
Pacific is forecasting 2006 cash flow from operating activities, for
the acquired assets, of $31 million, based on its projected EBITDA of
$42 million less projected interest expense of $11 million from the
debt component of the financing for the acquisition. Interest expense
will vary for many reasons, including general market conditions. Cash
flow from operating activities is a GAAP financial measure.