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Andeavor to develop NGL logistics hub in Bakken Shale


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Andeavor to develop NGL logistics hub in Bakken Shale

Andeavor Logistics LP plans to develop an NGL hub that would serve production in the Bakken Shale play in North Dakota, a project expected to cost $140 million to $150 million.

The North Dakota Logistics Hub project would involve the conversion of a segment of the Andeavor Bakkenlink crude oil pipeline to NGL service, which would deliver mixed NGLs from a third-party processing facility in McKenzie County, N.D., to a recently expanded fractionation complex at the partnership's Belfield processing plant, according to a Feb. 15 earnings release. The NGLs would then be moved to the Andeavor Fryburg rail terminal for train transport, eventually to be consumed within Andeavor's refineries and marketed by the company.

Volumes from the project are to be underpinned by a long-term gas processing dedication and minimum volume commitment. Andeavor Logistics expects to begin partial commercial operations in late 2018, with full operations scheduled to start in the first quarter of 2019. The logistics hub would yield annual net earnings of $15 million to $19 million and annual EBITDA of $22 million to $26 million, equivalent to a 6x to 7x multiple, the company said.

In addition, Andeavor Logistics agreed to acquire the 575-mile Wamsutter crude oil pipeline system from Plains All American Pipeline LP for $180 million. The system carries advantaged crude oil to Andeavor and other Salt Lake City refiners. The assets are expected to generate annual net earnings of $8 million to $12 million and EBITDA of $20 million to $24 million, representing a purchase price multiple of about 8x to 9x EBITDA.

Andeavor would pay for the acquisition using borrowings from its revolving credit facility. The deal is scheduled to close in the first half of 2018.