NGL Energy Partners, Magnum Liquids sign joint agreement on storage assets

NGL Energy Partners LP and Magnum Liquids, along with Magnum Development, announced the formation of a joint venture to focus on the storage of natural gas liquids and refined products by combining NGL’s Sawtooth storage facility with Magnum’s refined products rights and adjacent leasehold.

The company says NGL will sell an interest in Sawtooth to Magnum for $45 million in cash. The sale includes a natural gas liquids storage facility with 6.1 million barrels of capacity in five existing salt caverns, providing rail and truck access to western U.S. markets and located southwest of Salt Lake City.

Magnum will contribute its right, title and interest in certain leasehold and other assets located at the site. According to the company, the assets will be utilized to expand Sawtooth’s existing operations and allow for additional refined products storage at the facility.

NGL will own about 67.6 percent of the joint venture and Magnum will own the remaining 32.4 percent at closing. Magnum has the option to acquire an additional 21.6 percent interest from NGL under similar terms with an additional option to acquire NGL’s remaining 46 percent interest within three years of closing, the company adds.

“We are very excited to bring together NGL’s Sawtooth natural gas liquids storage asset with the refined products storage rights and commercial expertise of the Magnum team,” says Mike Krimbill, CEO of NGL. “This new joint venture will allow Sawtooth to utilize existing capacity to store refined products with very minimal capital requirements. It will also accelerate the earnings potential and broaden the scope of services offered at the facility. The proceeds received by NGL will be utilized to further reduce indebtedness and improve our leverage profile.”

The initial transaction, which is subject to certain closing conditions, is expected to close by March 31.

“We are very excited to enter into this joint venture with NGL by combining Magnum’s refined products project, which is in late-stage development, with Sawtooth,” says James Lam, managing director at Haddington. “The earmarking of an existing cavern for gasoline or diesel storage expedites our ability to provide the service to our customers and accelerates further development of our unique site.”

UBS Investment Bank served as the financial adviser to NGL and McGrath North Mullin & Kratz PC LLO served as NGL’s legal counsel in connection with this transaction.

King & Spalding served as Magnum and Haddington’s legal counsel in connection with this transaction.