USD Partners LP (NYSE:USDP) Files An 8-K Entry into a Material Definitive Agreement
Item1.01
| Entry Into a Material Definitive Agreement |
On June2, 2017, USD Partners LP (the Partnership, we and our)
announced that Stroud Crude Terminal LLC (STC) and STC Pipeline
LLC, each a wholly owned subsidiary of the Partnership, acquired
a 76-acre crude oil terminal in Stroud, Oklahoma (the Stroud
terminal), for a purchase price of approximately $22.8million, to
facilitate rail-to-pipeline shipments of
crude oil from our Hardisty terminal in Western Canada to the
Cushing, Oklahoma, crude oil hub. In connection with this
acquisition, we also purchased approximately $1.4 million and
expect to purchase another $1.2 million of crude oil used for
line fill and tank bottoms, both of which we expect to sell in
the near term, and incurred approximately $1.3 million of
one-time transaction costs. The Stroud terminal includes unit
train-capable unloading capacity of approximately 50,000 barrels
per day, expandable to approximately 70,000 barrels per day, as
well as two 70,000 barrel onsite storage tanks and one truck bay.
Additionally, the terminal includes a 12-inch diameter, 17-mile
pipeline with a direct connection to the crude oil storage hub
located in Cushing, Oklahoma. We also secured 300,000 barrels of
crude oil tank storage at the Cushing hub to facilitate outbound
shipments of crude oil from the Stroud terminal. Inbound product
is delivered by the Stillwater Central Rail, which handles
deliveries from both the BNSF and the Union Pacific
railways.
Concurrent with the Stroud
terminal acquisition, we entered into a new multi-year, take-or
pay terminalling services agreement with an investment grade
rated multi-national energy company, which we refer to as the
Stroud customer, for the use of approximately 50% of the Stroud
terminals available capacity. The term of this agreement is
scheduled to begin on October1, 2017, and to conclude on June30,
2020. To facilitate the origination of barrels from our Hardisty
terminal to be shipped to the Stroud terminal, USD Marketing LLC
(USDM), a wholly-owned subsidiary of USD Group LLC (USDG),
assumed the rights and obligations of J. Aron Company ( J. Aron)
under its terminalling services agreement with us at the Hardisty
terminal. We concurrently entered into an agreement with the
Stroud customer to provide access to the combined monthly loading
slots previously held by both J. Aron and USDM (which slots are
held by USDM under an existing terminalling services agreement
with us). These combined slots represented approximately 25% of
the Hardisty terminals available monthly capacity. Additionally,
the contracted term for this capacity has been extended to
June30, 2020.
In exchange for contributing
its Hardisty rail slots to facilitate the origination of barrels
for the Stroud customer, and to a Marketing Services Agreement,
dated May31, 2017, between STC and USDM, we granted USDM the
right to market the remaining capacity at the Stroud terminal in
exchange for a nominal per barrel fee. USDM will fund any related
capital costs associated with increasing the throughput or
efficiency of the terminal to handle additional barrels. We
anticipate that the fees from USDM for any incremental volume
will be accretive to cash flows from operating activities and
distributable cash flow. Upon expiration of the Stroud customers
contract in June 2020, the same marketing rights will apply to
throughput in excess of the throughput necessary for the Stroud
terminal to generate Adjusted EBITDA that is at least equal to
the average monthly Adjusted EBITDA from the Stroud customer
during the 12 months prior to expiration. We also granted USDG
the right to develop other projects at the Stroud terminal in
exchange for the payment to us of market compensation for the use
of our property for such development projects. Any such
development projects would be wholly-owned by USDG and would be
subject to our existing right of first offer with respect to
midstream projects developed by USDG. The Marketing Services
Agreement will be included as an Exhibit to our Quarterly Report
on Form 10-Q for the quarter ending June30, 2017.
In connection with the
acquisition, we expect to incur approximately $1.2million for
anticipated growth capital expenditures to retrofit the Stroud
terminal to handle heavy grades of Canadian crude oil. We expect
the commercial arrangements at the Stroud terminal will be
accretive to our 2018 and 2019 cash flows from operating
activities and distributable cash flow. We funded the transaction
with available capacity on our revolving credit
facility.
| Item9.01 | Other Information |
The information included in
Item 1.01 of this Current Report on Form 8-K is incorporated
herein by reference.
About USD Partners LP (NYSE:USDP)
USD Partners LP (USD Partners) is a fee-based, master limited partnership formed by US Development Group LLC (USD) to acquire, develop and operate energy-related logistics assets, including rail terminals and other midstream infrastructure. The Company conducts its business through two segments: Terminalling services and Fleet services. Its Terminalling services segment consists operations of Hardisty terminal, Casper terminal and Ethanol terminals. The Fleet services segment provides railcars and fleet services related to the transportation of liquid hydrocarbons and biofuels by rail. Its fleet consists of approximately 3,310 railcars, which it leased from various railcar manufacturers and financial entities. The Company’s principal assets consist of a crude oil origination terminal in Hardisty, Alberta, Canada; a crude oil terminal in Casper, Wyoming, and two unit train-capable ethanol destination terminals in San Antonio, Texas and West Colton, California.