Tallgrass Energy announces crude oil terminal acquisitions, developments at Pony Express

LEAWOOD, Kan. — Tallgrass Energy Partners, LP announced two strategic acquisitions by its Tallgrass Terminals business and several significant commercial developments that continue to expand the variety of services offered by Pony Express in key crude oil producing basins it serves.

Tallgrass Terminals, LLC has entered into an agreement to acquire a 51% membership interest in the Pawnee, Colo. crude oil terminal from Zenith Energy for approximately $31 million. The Pawnee Terminal is an injection point for the Tallgrass Pony Express Northeast Colorado Lateral (NECL), with 300 Mbbl of storage and backed by minimum volume commitments of approximately 90 Mbpd. The Pawnee Terminal will provide commercial and operational synergies with Pony Express and offers the potential for incremental sourcing opportunities such as directly connecting nearby producers. Tallgrass Terminals expects the transaction to close in Q1 2018, subject to certain closing conditions.

In addition, Tallgrass Terminals has acquired a 38% interest in Deeprock North, LLC, which owns a crude oil terminal in North Cushing, Okla., immediately adjacent to the Deeprock Development, LLC crude oil terminal facility. The purchase price for the interest was $19.5 MM or approximately eight times current cash flow. Immediately following the acquisition, Deeprock North was merged into Deeprock Development. After the acquisition and merger, Deeprock Development now owns a larger and more diverse terminalling complex with total storage capacity of 4.0 MMbbl. Tallgrass Terminals owns approximately 60% of the combined entity and retains significant strategic and commercial control. Tallgrass expects the acquisition to enhance and expand Tallgrass Terminals’ commercial offerings for both Pony Express customers and other customers in Cushing.

Pony Express recently concluded a successful binding open season to secure committed shipper contracts for crude oil transportation of a new common stream on the Platteville Extension. The open season resulted in additional unaffiliated third-party commitments of 10 Mbpd for a total of 37.5 Mbpd of short-haul and long-haul binding transportation commitments. The 55-mi Platteville Extension is approximately 60% complete and expected to begin operations in April 2018, with the associated Grasslands Terminal expected to be in service in Q4 2018. The initial capacity of the Platteville Extension will be approximately 40,000 barrels per day, increasing to approximately 80,000 bpd once the Grasslands Terminal is in service.

In late December 2017, Pony Express shippers nominated more than 10 MMbbl, or approximately 325,000 bpd for movements in January 2018. If realized, this would constitute the largest per-day average during a single month in Pony Express' history. Tallgrass affiliates account for only about 5% of the nominated volumes.

Construction on the Holly Frontier El Dorado and CHS McPherson, Kan. refinery connections is complete, with line fill and commercial service expected in early January 2018 for both.

Once the two new refinery connections are in service, Pony Express shippers will be able to deliver more than 300,000 bpd to three significant refineries directly connected to Pony Express, including the currently connected refinery in Ponca City, Okla.

As previously announced, Tallgrass Terminals has a signed, 10-yr take-or-pay agreement for 8,000 bpd from a new customer to support the construction of a terminal in the Central Kansas Uplift. Construction of the terminal is progressing on schedule, with completion and in-service expected by March 2018. Upon completion, the terminalling facilities will have delivery capabilities of approximately 20,000 bpd into the Pony Express mainline, providing the opportunity to accommodate incremental volumes from the Central Kansas Uplift.

Upon completion of these projects, Pony Express will have six different supply sources and five different crude oil streams capable of being batched on the system.

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