Occidental Petroleum Corporation
) has inked a contract with
Magellan Midstream Partners, L.P.
) for building a crude oil pipeline called BridgeTex Pipeline,
stretching from Colorado City, Texas to the Houston Gulf Coast
area. Both the organizations will jointly install this pipeline
for transferring crude oil from the Permian Basin. This pipeline
is expected to be online by the middle of 2014, subject to
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OCCIDENTAL PET (OXY): Free Stock Analysis
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Per the agreement, the organizations will build few pipelines
including an approximately 400 miles long 20-inch pipeline
between Colorado City and Magellan Midstream Partners' terminal
in East Houston and roughly 50 miles long 24-inch pipeline from
East Houston to Texas City.
In addition, the organizations will construct 1.4 million barrels
of crude oil storage at East Houston and approximately 1.2
million barrels of crude oil storage at Colorado City to ease the
A jointly-formed project team will supervise this project. In
particular, Magellan Midstream Partners will act as a
construction manager and operator of the pipeline.
The BridgeTex Pipeline project will enable the organizations to
transport roughly 300,000 barrels of oil per day ("Bbls/d").
Besides, the strategic location of the pipeline will facilitate
it to access the Houston Ship Channel refineries, the Texas City
refineries and several other refineries throughout the Gulf Coast
through third-party pipelines.
It is evident from the past that most of the crude oil and
natural gas companies install new pipelines or expand the
existing ones after getting transportation and service contracts
from the customers. In this project, the organizations have
already received long-term transportation commitments and orders
from the Federal Energy Regulatory Commission along with
approvals related to pipeline's tariff structure.
Currently, Occidental Petroleum's 2012 capital expenditure is
focused on active exploration and production activities. In the
first nine months of 2012, the company utilized $7.7 billion
under its capital investment program. A sharp rise in the
company's capital expenditure from $5.0 billion in the year-ago
comparable period was primarily due to development expenses at
its Oil and Gas, Chemicals and Midstream segments.
In third-quarter 2012, Occidental Petroleum produced 473 thousand
barrels of oil per day ("MBbls/d") including a production figure
of 144 MBbls/d from the Permian operations. We view this deal as
a positive catalyst for the company's future growth along with
strengthening and enhancing its crude oil transportation
portfolio. As a result, the company will be able to provide
uninterrupted services to its customers with the help of a
well-equipped pipeline network provider Magellan Midstream
Los Angeles, California-based Occidental Petroleum Corporation
along with its subsidiaries engages in exploration, development,
production and marketing of crude oil, natural gas liquids and
natural gas in the United States, Middle East, North Africa and
Latin America. With a market capitalization of $61.14 billion,
the company has 11,300 full time employees. Occidental Petroleum
currently has short-term Zacks #3 Rank (Hold rating).