Pipeline operator
Magellan Midstream Partners, L.P.
(
MMP
) along with Los Angeles, California based energy firm
Occidental Petroleum Corporation
(
OXY
) announced plans to set up a joint venture to build a 400-mile
long oil transport pipeline.
The BridgeTex Pipeline - with a transportation capacity of
approximately 278,000 barrels per day of crude oil - will extend
from Colorado City, Texas to the Houston Gulf Coast area. Along
with this pipeline, Magellan Midstream will also expand its
distribution system between East Houston and Texas City.
The pipeline network, pending customary permits and approvals,
is slated to come online by mid-2014.
In this regard, the companies are looking for potential buyers
interested in obtaining services of the pipeline. Binding
commitments from customers will be received till July 11.
Although the financial aspect of the proposed joint venture was
not disclosed, Magellan Midstreamwill act as the operator of the
project.
Tulsa, Oklahoma-based Magellan Midstream is a master limited
partnership that owns and operates a diversified portfolio of
energy infrastructure assets. The partnership primarily transports,
stores and distributes refined petroleum products and, to a lesser
extent, ammonia.
In mid-March, Magellan Midstream decided to increase the
capacity of the crude oil pipeline - Crane-to-Houston - to 225,000
barrels per day (bpd), following a successful bidding open
season.
We remain impressed by Magellan's high-quality and diverse
portfolio of midstream assets that generate stable and recurring
revenues by way of long-term fee-based contracts. Over the last few
years, the partnership has consolidated its position in the
midstream business, through a combination of expansion projects and
accretive acquisitions.
However, we remain concerned about the current operating
scenario for pipeline operators. Magellan is also susceptible to
lower-than-expected demand for refined products, commodity price
fluctuations and cost overruns on various ventures.
Magellan Midstream and Occidental Petroleum units currently
retain a Zacks #3 Rank, which translates into a short-term Hold
rating. We are also maintaining our long-term Neutral
recommendation on both stocks.
MAGELLAN MDSTRM (MMP): Free Stock Analysis
Report
OCCIDENTAL PET (OXY): Free Stock Analysis
Report
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