Energy Transfer and Sunoco Announce Strategic Permian Basin Crude Oil Joint Venture

Rhea-AI Summary

Energy Transfer LP (NYSE: ET) and Sunoco LP (NYSE: SUN) have announced a strategic joint venture in the Permian Basin, combining their crude oil and produced water gathering assets. The venture, effective July 1, 2024, will be operated by Energy Transfer, holding a 67.5% interest, while Sunoco will hold 32.5%. The joint venture will manage over 5,000 miles of pipelines and 11 million barrels of crude oil storage capacity.

This collaboration is expected to be immediately accretive to distributable cash flow per LP unit for both companies. Energy Transfer's long-haul crude pipeline network is excluded from the joint venture. The deal was facilitated by financial advisors Intrepid Partners, and Guggenheim Securities, , with legal counsel provided by several firms.

Positive

• Formation of a strategic joint venture in the Permian Basin
• Joint venture to operate over 5,000 miles of pipelines and 11 million barrels of crude oil storage capacity
• Expected to be immediately accretive to distributable cash flow per LP unit for both Energy Transfer and Sunoco

Negative

• None.

Insights

Financial Analyst

This joint venture between Energy Transfer and Sunoco in the Permian Basin is strategically significant. With Energy Transfer holding a 67.5% interest and operating the venture and Sunoco holding a 32.5% interest, the partnership leverages the strengths of both entities. By combining their crude oil and produced water gathering assets, they enhance operational efficiency and expand their asset base.

One key financial implication is the expected immediate accretive effect on distributable cash flow per LP unit for both companies. This is favorable for investors anticipating increased distributions. The effective date of July 1, 2024, means these benefits could be realized soon, potentially boosting investor confidence and stock performance.

It's also notable that the long-haul crude pipeline network of Energy Transfer is excluded from the joint venture. This allows Energy Transfer to retain control over a significant portion of its operations while optimizing the use of shared resources within the joint venture.

Overall, this joint venture is a strategic move to strengthen market position and improve financial performance in the competitive energy sector.

Energy Market Expert

The formation of this joint venture between Energy Transfer and Sunoco enhances their footprint in the Permian Basin, which is one of the most prolific oil-producing regions in the United States. Combining over 5,000 miles of pipelines and 11 million barrels of storage capacity under a single operational strategy is likely to improve logistics, reduce operational costs and increase market competitiveness.

For the energy market, this consolidation can mean enhanced stability and reliability of crude oil supply. By optimizing asset utilization and potentially increasing throughput, the joint venture can improve efficiency in crude oil gathering and produced water management, critical components in oil extraction and operational sustainability.

However, the joint venture's success will rely heavily on the effective integration of resources and seamless coordination between both companies. Any disruptions could lead to operational inefficiencies or missed opportunities in the highly competitive Permian market.

In the long term, this joint venture could set a precedent for similar collaborations in the industry, promoting a trend towards consolidation and resource sharing to optimize asset performance and market presence.

DALLAS, July 16, 2024 /PRNewswire/ -- Energy Transfer LP (NYSE: ET) ("Energy Transfer") and Sunoco LP (NYSE: SUN) ("Sunoco") today announced the formation of a joint venture combining their respective crude oil and produced water gathering assets in the Permian Basin.

Energy Transfer will serve as the operator of the joint venture and contribute its Permian crude oil and produced water gathering assets and operations. Sunoco will contribute all of its Permian crude oil gathering assets and operations to the joint venture. Energy Transfer's long-haul crude pipeline network that provides transportation of crude oil out of the Permian Basin to Nederland, Houston, and Cushing is excluded from the joint venture.

As depicted in the included map, the joint venture will operate more than 5,000 miles of crude oil and water gathering pipelines with crude oil storage capacity in excess of 11 million barrels.

Energy Transfer will hold a 67.5% interest in the joint venture with Sunoco holding a 32.5% interest.

The formation of the joint venture has an effective date of July 1, 2024, and is expected to be immediately accretive to distributable cash flow per LP unit for both Energy Transfer and Sunoco.

Intrepid Partners, LLC served as financial advisor to Energy Transfer's conflicts committee, while Guggenheim Securities, LLC served as financial advisor to Sunoco's special committee. Potter Anderson & Corroon LLP acted as Delaware counsel for Energy Transfer's conflicts committee, and Richards, Layton & Finger, P.A. acted as Delaware counsel for Sunoco's special committee. Vinson & Elkins LLP and Akin Gump Strauss Hauer & Feld LLP also acted as legal counsel to the partnerships on the transaction. 

About Energy Transfer 

Energy Transfer LP (NYSE: ET) owns and operates one of the largest and most diversified portfolios of energy assets in the United States, with more than 130,000 miles of pipeline and associated energy infrastructure. Energy Transfer's strategic network spans 44 states with assets in all of the major U.S. production basins. Energy Transfer is a publicly traded limited partnership with core operations that include complementary natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, natural gas liquids ("NGL") and refined product transportation and terminalling assets; and NGL fractionation. Energy Transfer also owns Lake Charles LNG Company, as well as the general partner interests, the incentive distribution rights and approximately 21% of the outstanding common units of Sunoco LP (NYSE: SUN), and the general partner interests and approximately 39% of the outstanding common units of USA Compression Partners, LP (NYSE: USAC). For more information, visit the Energy Transfer LP website at www.energytransfer.com. 

About Sunoco LP

Sunoco LP (NYSE: SUN) is a leading energy infrastructure and fuel distribution master limited partnership operating in over 40 U.S. states, Puerto Rico, Europe, and Mexico. The Partnership's midstream operations include an extensive network of approximately 14,000 miles of pipeline and over 100 terminals. This critical infrastructure complements the Partnership's fuel distribution operations, which serve approximately 7,400 Sunoco and partner branded locations and additional independent dealers and commercial customers. SUN's general partner is owned by Energy Transfer LP (NYSE: ET).

Forward-Looking Statements

This news release may include certain statements concerning expectations for the future that are forward-looking statements as defined by federal law. Such forward-looking statements are subject to a variety of known and unknown risks, uncertainties, and other factors that are difficult to predict and many of which are beyond management's control. An extensive list of factors that can affect future results are discussed in Energy Transfer's and Sunoco's Annual Reports on Forms 10-K and other documents filed from time to time with the Securities and Exchange Commission. Energy Transfer and Sunoco undertake no obligation to update or revise any forward-looking statement to reflect new information or events.

The information contained in this press release is available on Energy Transfer's website at www.energytransfer.com and Sunoco's website at www.sunocolp.com.

Energy Transfer
Investors:
Bill Baerg, Vice President – Investor Relations
Brent Ratliff, Vice President – Investor Relations
Lyndsay Hannah, Director – Investor Relations
(214) 840-0795, InvestorRelations@energytransfer.com

Media:
Vicki Granado – Vice President, Media & Communications
(214) 981-0761, vicki.granado@energytransfer.com

Sunoco LP
Investors:
Scott Grischow, Treasurer, Senior Vice President – Finance
(214) 840-5660, scott.grischow@sunoco.com

Media:
Chris Cho, Senior Manager – Communications
(210) 918-3953, chris.cho@sunoco.com

 

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SOURCE Sunoco LP

FAQ

What is the ownership structure of the Energy Transfer and Sunoco joint venture in the Permian Basin?

Energy Transfer will hold a 67.5% interest in the joint venture, while Sunoco will hold a 32.5% interest.

When is the effective date of the Energy Transfer and Sunoco joint venture (SUN)?

The joint venture has an effective date of July 1, 2024.

What assets are included in the Energy Transfer and Sunoco joint venture in the Permian Basin?

The joint venture includes Energy Transfer's Permian crude oil and produced water gathering assets and operations, as well as all of Sunoco's Permian crude oil gathering assets and operations.

How many miles of pipelines will the Energy Transfer and Sunoco joint venture operate?

The joint venture will operate more than 5,000 miles of crude oil and water gathering pipelines.