Magellan Midstream Partners LP
) has signed a deal with
Plains All American Pipeline LP
) to buy two refined petroleum products pipeline systems - spread
over roughly 800 miles - for about $190 million.
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The to-be-bought assets include the Rocky Mountain pipeline
system, stretching over roughly 550 miles, and the New Mexico
pipeline system that covers 250 miles.
The Rocky Mountain pipeline system has 4 terminals with a storage
capacity of 1.7 million barrels. The system carries refined fuels
in South Dakota, Colorado and Wyoming.
On the other hand, the New Mexico pipeline system transports
refined products from El Paso, Texas, to Albuquerque, New Mexico.
The system also carries refined products to the Mexican border by
a third party.
Magellan Midstream will fund the procurement with cash and loans
from its revolving credit facility, if required. The deal is
expected to close in the second quarter, subject to regulatory
The Magellan Midstream management believes that this acquisition
will be accretive to the partnership immediately with incremental
cash flows generated in the coming years.
Tulsa, Oklahoma-based Magellan Midstream owns and operates a
diversified portfolio of energy infrastructure assets. The
partnership conducts its operations in three segments, namely,
Petroleum Products Pipeline System, Petroleum Products Terminals
and Ammonia Pipeline System.
Magellan Midstream Partners owns an attractive portfolio of
energy infrastructure assets that generate stable and recurring
fee- and tariff-based revenues. This includes the longest U.S.
refined petroleum products pipeline system, access to more than
40% of refining capacity in the continental U.S. along with
imports, and 85 petroleum terminals with more than 80 million
barrels of storage.
On the flip side, results for Magellan Midstream are directly
exposed to refined product demand, which are inherently volatile
and subject to complex market forces. Actual demand could differ
significantly from our expectations, thereby affecting the
partnership's revenues, cash flows and distributions.
Magellan Midstream currently carries a Zacks Rank #3 (Hold),
implying that it is expected to perform in line with the broader
U.S. equity market over the next one to three months.
In the energy sector,
Range Resources Corporation
) display better fundamentals and currently sport a Zacks Rank #2