Magellan, PAA to Build Saddlehorn Pipeline

Magellan Midstream Partners, L.P. and Plains All American Pipeline, L.P. have formed Saddlehorn Pipeline Company, a 50/50 limited liability company, to construct, own and operate the Saddlehorn pipeline, an approximately 550-mile pipeline that will transport various grades of crude oil from the DJ Basin, and potentially the broader Rocky Mountain area resource plays, to storage facilities in Cushing, OK owned by Magellan and Plains. An extension to Carr, CO is also under consideration for connection to existing crude oil assets owned by Plains in that region.

 

The project is estimated to cost between $800 million and $850 million. Magellan will serve as construction manager and pipeline operator. Subject to receipt of necessary permits and regulatory approvals, the Saddlehorn pipeline is expected to be operational during mid-2016.

 

Michael Mears, Magellan's Chief Executive Officer, said, "Aligning with Plains makes strategic sense due to their significant marketing and pipeline presence in this region, adding further value to the pipeline project to deliver crude oil to the Cushing hub."

 

Greg L. Armstrong, Chairman and CEO of Plains All American, said, "The project is underpinned by ship-or-pay contracts with major producers in the area that protect our investment. Moreover, this arrangement provides us the opportunity to realize meaningful upside to base level returns by shipping additional volumes associated with PAA's marketing activities in the region."

 

The open season for the Saddlehorn pipeline expired February 27. Binding commitments have been received from Noble Energy, Inc. and a wholly owned subsidiary of Anadarko Petroleum Corporation (APC). In addition, Anadarko has an option to participate in equity ownership up to 20% in Saddlehorn Pipeline Company. Anadarko's option expires approximately two weeks after the closing of the open season.