Magellan Wraps Up $57M Pipeline Buy - Analyst Blog

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Pipeline operator Magellan Midstream Partners LP ( MMP ) has closed its previously announced acquisition of the Texas and New Mexico-based pipeline properties from Plains All American Pipeline LP ( PAA ). Magellan has allocated $57.0 million from cash on hand for the acquisition.

The Texas-New Mexico pipeline system stretches over 250 miles and carries refined petroleum products from El Paso, Texas, to Albuquerque, NM. The carrier also transports products to the Mexican border by a third party

Management believes that this purchase will facilitate its Albuquerque and central New Mexico customers to access the refined products of West Texas, Gulf Coast and Mid-Continent.

However, Magellan also informed that its planned purchase of the Rocky Mountain pipeline system is yet to be completed and is subject to the Federal Trade Commission's approval. The system, which spreads over 550 miles, carries refined products in South Dakota, Colorado and Wyoming.

Tulsa, OK-based Magellan is a master limited partnership (MLP) 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. Magellan conducts its operations in three segments: Refined Products, Crude Oil and Marine Storage.

We remain upbeat regarding Magellan's acquisition of petroleum storage and pipelines from U.K. super major BP plc's ( BP ) subsidiary. Following the acquisition, Magellan owns one of the largest crude oil storages in the Cushing crude oil region and will continue to exploit opportunities necessary for better utilization of these assets.

However, unfavorable regulatory changes by the Federal Energy Regulatory Commission (FERC) would impact the partnership's results. This will also lead to increasing borrowing costs of Magellan Midstream Partners and lower market value of its limited partner units.

Magellan 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.

Meanwhile, an oil and gas production pipeline MLP in the energy sector, which is expected to perform better over the short-term is TC PipeLines LP ( TCP ). The stock currently sports a Zacks Rank #1 (Strong Buy).

BP PLC (BP): Free Stock Analysis Report

MAGELLAN MDSTRM (MMP): Free Stock Analysis Report

PLAINS ALL AMER (PAA): Free Stock Analysis Report

TC PIPELINES (TCP): Free Stock Analysis Report

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

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

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