Gibson Energy Secures South Texas Gateway Oil Terminal In $1.1-Billion Deal
Canadian energy company Gibson Energy (TSX: GEI) has secured an agreement with Buckeye Partners to acquire the South Texas Gateway oil terminal for a staggering $1.1 billion in cash.
This strategic move by Gibson grants them access to one of the world’s most competitive liquid terminals and export facilities. The acquisition includes direct pipeline connections to abundant, cost-effective, and long-lasting oil reserves, as well as the ability to handle Very Large Crude Carriers (VLCCs), according to a press release issued by the company.
Situated in Ingleside, Texas, at the entrance of the Corpus Christi Bay, the South Texas Gateway (STG) terminal holds the distinction of being the second-largest oil export facility in the United States. With a current storage capacity of 8.6 million barrels, there is also the potential to expand it to 10 million barrels.
“By adding 1 million barrels per day of export capacity and nearly 9 million barrels of terminal storage in a highly strategic location, we are further advancing Gibson’s infrastructure footprint. This acquisition provides us with a strong platform for future growth with existing and new customers,” said CEO Steve Spaulding.
Boasting state-of-the-art infrastructure, the STG terminal commenced operations in July 2020 and completed additional storage facilities in March 2021, reaching a total capacity of 8.6 million barrels across 20 tanks. It is connected to the Permian and Eagle Ford basins through newly-constructed pipelines, strategically positioning it as a gateway for these basins to global oil exports. The terminal accommodates two deep-water docks, allowing for the simultaneous loading of two VLCCs.
The surge in U.S. oil exports in recent years, driven by increased shale production, reached a record of approximately 4.5 million barrels per day in March. Additionally, Russia’s invasion of Ukraine heightened the demand for U.S. oil.
In line with this trend, the South Texas Gateway terminal achieved an all-time high of 670,000 barrels per day in exports during the same month and has continued to play a significant role in handling U.S. crude exports. In 2023 year-to-date, it accounted for approximately 12% of the total U.S. crude oil exports.
The terminal is currently 50% owned and operated by Buckeye Partners, with Phillips 66 and Marathon Petroleum Corp each holding 25% stakes.
Furthermore, the Energy Information Administration reported that combined crude and fuel exports from the United States hit a record-breaking 11.27 million barrels daily in March. Among these exports, crude oil accounted for 4.8 million barrels per day, reaching an unprecedented level. This surge reflects a twelve-fold increase in exports since the lifting of the ban on selling crude oil abroad in 2015.
To finance the deal, Gibson has secured bridge financing facilities totaling $1.1 billion from Royal Bank of Canada, BMO Capital Markets, and JPMorgan Chase Bank Toronto Branch. Further financing will be achieved through an equity offering of subscription receipts amounting to $350 million, followed by subsequent offerings of senior unsecured medium-term notes and hybrid debt securities of various tenors.
Additionally, Gibson will seek to upsize its sustainability-linked revolving credit facility from $750 million to $1.0 billion and has already obtained commitments from the bridge lenders.
The completion of the acquisition is anticipated to take place in the third quarter of 2023, pending the fulfillment of customary closing conditions, including the expiration or termination of the waiting period under the U.S. Hart-Scott-Rodino Antitrust Improvements Act.
Information for this story was found via Reuters, OilPrice.com, and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
The author suggests the export oil industry benefits from the war in Ukraine with the increase demand for alternatives to Russian oil. Which came first, strategies to increase oil exports or embargoes to limit Russian oil sales?