Oil refiner Phillips 66 (NYSE: PSX) has agreed to sell to its midstream partner, Phillips 66 Partners L.P. (NYSE: PSXP), the parent company’s 25% stake in the Dakota Access Pipeline (DAPL), its stake in another company that holds a 25% stake in the Bakken Pipeline and 100% of its interest in a coking unit at its Sweeny refinery, for a total consideration of $2.4 billion.

Phillips 66 Partners plans to fund the $1.7 billion cash portion of the transaction with a combination of debt, private placement of common units, and additional units valued at $240 million issued to Phillips 66. The master limited partnership (MLP) also will assume $625 million of Phillips 66 Bakken Pipeline debt and $100 million of Phillips 66 debt on the coking unit.

The Bakken Pipeline includes the controversial DAPL that delivers 520,000 barrels a day of crude oil from North Dakota to Patoka, Illinois, and then delivers the crude to the Phillips 66 terminal in Beaumont, Texas, through a converted natural gas pipeline — the Energy Transfer Crude Oil Pipeline. The total length of the system is 1,926 miles.

This is basically a standard “drop-down” deal that transfers debt from the parent to an MLP, along with cash from the MLP to the parent, in a move that dresses up the parent’s balance sheet.

Phillips 66 Partners CEO Greg Garland said:

This is the largest acquisition PSXP has made to date. … This acquisition supports our EBITDA growth objective by adding solid fee-based assets to the Partnership and keeps us on track to deliver our 30 percent distribution growth target. To meet our $1.1 billion of annual run-rate adjusted EBITDA goal by the end of 2018, we do not anticipate accessing the equity market, other than through selective use of our at-the-market program.

Neither Phillips 66 nor Phillips 66 Partners shares were active in Friday’s premarket trading. Phillips 66 stock traded up fractionally to $89.45 early Friday, in a 52-week range of $75.14 to $89.71. Phillips 66 Partners common units traded at $50.50, a 4% gain on the day, in a 52-week range of $42.47 to $58.00.

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