Magellan-KMP, APC Sign Expansion Deal - Analyst Blog


Double Eagle Pipeline LLC, a joint venture (JV) between Magellan Midstream Partners LP ( MMP ) and Kinder Morgan Energy Partners ( KMP ) has inked a deal with Anadarko Petroleum Corp. ( APC ), a major independent oil and natural gas exploration and production (E&P) company in the world. While Magellan Midstream is a publicly traded energy pipeline partnership, Kinder Morgan Energy is the largest independent owner and operator of petroleum product pipelines in the US.

Per the long-term contract, Double Eagle will carry the increased crude and condensate produced at the Eagle Ford Shale from Gardendale, Texas to the Houston Ship Channel through the Kinder Morgan Crude and Condensate pipeline system (KMCC). Thus, this will result in the expansion of Double Eagle's Eagle Ford transportation facility.

To support the expansion project, Double Eagle is planning to manufacture a pump station along with a storage facility of 160,000 barrels capacity at Gardendale. Double Eagle will also construct a 10-mile pipeline for connecting Double Eagle Pipeline with KMCC Pipeline.  

Double Eagle will carry the crude and condensate output from its to be manufactured station at Gardendale to the Helena station of KMCC. At the Helena station, KMCC will manufacture a 240,000 barrel-storage facility to store the transported crude and condensate, from where KMCC will carry the output to the Houston Ship Channel. Magellan Midstream added that the creation of the facilities will likely be over by the first half of 2015.

Magellan Midstream believes that the expansion project will be beneficial to the Eagle Ford producer Anadarko Petroleum for getting access to the markets in the Houston region. Moreover, the development is likely to earn increased cash flows for unitholders.

Tulsa, Oklahoma-based Magellan Midstream owns and operates a diversified portfolio of energy infrastructure assets. The partnership currently carries a Zacks Rank #2 (Buy), which implies that it is expected to outperform the broader U.S. equity market over the next one to three months.

One can also consider Harvest Natural Resources Inc. ( HNR ) in the energy sector that offers value. The stock sports a Zacks Rank #1 (Strong Buy).

ANADARKO PETROL (APC): Free Stock Analysis Report

HARVEST NATURAL (HNR): Free Stock Analysis Report

KINDER MORG ENG (KMP): Free Stock Analysis Report

MAGELLAN MDSTRM (MMP): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: APC , HNR , KMP , MMP

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