Publicly traded energy master limited partnership,
NuStar Energy L.P.
) recently declared the start of a binding open season by its
subsidiary NuStar Logistics, L.P. for its proposed Niobrara Falls
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As part of the project, new crude petroleum pipelines would be
constructed in the Niobrara Shale. This pipeline will be connected
to NuStar's existing petroleum-products pipeline from Denver to
McKee, Texas. The pipeline would then be transformed to a crude oil
service, reversed and then attached to the NuStar Wichita Falls 14
The pipeline will transport crude petroleum from the Niobrara Shale
near Platteville and Watkins, Colorado to Wichita Falls, Texas.
The proposed project would transport Permian and Granite Wash crude
petroleum to NuStar's Dixon, Texas Tank Farm so that it can be
delivered to other destinations. This system will also carry
petroleum goods to refineries in Texas, Colorado and Oklahoma.
It is likely that this upcoming project would also be connected to
Sunoco Logistics Partners, L.P.
) Permian Express Phase I project at Wichita Falls, Texas. It is
expected that this project would be in service from the first
quarter of 2014.
The binding open season is scheduled to close on November 15, 2012.
NuStar - which was spun off from the U.S. refiner
Valero Energy Corp.
) in 2006 - currently retains a Zacks #3 Rank (short-term Hold
rating). We are also maintaining our long-term Neutral
recommendation on the unit.
We like NuStar Energy for its diversified asset base and robust
distribution-growth prospects. A strong pipeline of organic growth
projects and contribution from acquisitions provide the partnership
with an above peer-group average distribution coverage ratio.
However, over the last few years, NuStar has consolidated its
business through a combination of organic efforts and accretive
acquisitions. We believe the higher operating expenses associated
with this expanded asset base may lead to reduced returns going