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Plains, Delek Logistics create JV to expand Oklahoma-to-Texas oil pipeline

Plains All American Pipeline LP formed a joint venture with Delek Logistics Partners LP to expand its Red River oil pipeline system, which would boost its capacity to 235,000 barrels per day from 150,000 bbl/d.

Under the agreement, Delek Logistics acquired a 33% stake in a new joint venture, Red River Pipeline Co. LLC, from a subsidiary of Plains for $128 million, according to a May 28 news release. Plains would remain the pipeline operator and holder of the remaining 67% interest in the joint venture. The 16-inch Red River pipeline system runs from Cushing, Okla., to Longview, Texas.

Delek Logistics also plans to contribute about $20.0 million to the joint venture for the expansion project. Delek Logistics' parent Delek US Holdings Inc. increased its long-term throughput and deficiency agreement on the Red River system to 100,000 bbl/d, from 35,000 bbl/d, to support the expansion project and raise its direct access to crude from the Cushing, Okla., hub.

Delek Logistics expects the joint venture to contribute about $13.5 million to $15.5 million of annualized adjusted EBITDA in its first year, which would increase to about $20.0 million to $25.0 million in the first half of 2020, when the project is estimated for completion.