Oiltanking Partners, L.P. (NYSE: OILT), on Monday announced a $104 million expansion project to construct approximately 3.2 million barrels of new crude oil storage capacity at its Houston terminaling facility. The project scope includes the purchase of 95 acres of nearby land for approximately $12 million, on which the new capacity will be located. The incremental land purchase can also accommodate the construction of an additional 3 million barrels of storage capacity to meet future needs.
Carlin G. Conner, President, CEO and Chairman of the Board, stated, "As expected, the dramatic increase in domestic crude oil production has created a growing need for storage capacity by oil producers and marketers attracted to premium Gulf Coast crude oil pricing and our local refinery customers. This new project is the second phase of our infrastructure and storage expansion to address the robust demand from both existing and new customers and is supported by new long-term storage contracts."
"With this project, we have now announced nearly $200 million of capital investments to expand our connectivity and storage capacity since our initial public offering in July of 2011. We believe Oiltanking Partners is well positioned for continued growth," concluded Conner.
All environmental and internal approvals required to commence construction are in place, and the additional storage capacity is expected to be placed into service in the fourth quarter of 2013. Once complete, the new storage capacity will bring total active storage capacity at the Partnership to approximately 22 million barrels.
The expansion project is expected to be accretive to distributable cash flow once the additional storage is operational and is expected to generate returns of approximately 6-8 times EBITDA, or earnings before interest, taxes and depreciation, generally targeted for organic expansion projects. The Partnership anticipates funding the project primarily with debt.