Plains Tests Project Viability - Analyst Blog
March 16 2012 - 9:45AM
Zacks
Plains All American
Pipeline LP(PAA) in order to check the commercial
viability of its proposed new crude oil pipeline from Baker to
Billings has decided to conduct an open season for committed orders
for the pipeline.
The proposed pipeline will start
from Plains’ Baker, Montana station and will have an initial
capacity to transport 50,000 barrels per day of light sweet crude
oil to Billings, Montana. The strategic location of the Billings
station will allow the shippers to further move the volumes using
Plains’ integrated pipelines.
Pipeline construction involves
intensive capital investments and an open season verifies the
ground reality for the pipeline operators. This action will give
the partnership a clear indication as to the long-term demand for
transporting volumes via this pipeline.
Last year, such an action allowed
El Paso Corporation (EP) to decide on the pace of
development of the Marcellus Ethane Pipeline System. The results of
the open season were more conservative than the company’s estimate.
El Paso consequently decided to slow down the pipeline project
expansion.
We believe Plains too have taken a
wise decision before going ahead with its proposed pipeline. The
pipeline under consideration is coming up in an area where a few
oil and gas companies are currently operating. Therefore, the
partnership might gain the necessary long-term commitments within
the two months of window provided in the open season.
Plains All American Pipeline
currently retains a Zacks #3 Rank, which translates into a
short-term Hold rating. The partnership competes with
Enterprise Products Partners LP (EPD) and
Sunoco Logistics Partners L.P. (SXL).
Houston, Texas based Plains All
American Pipeline owns assets strategically located in
well-established oil producing regions, catering to major U.S.
refinery and distribution markets. Other than organic growth
opportunities, the partnership also relies on acquisitions to spur
growth.
EL PASO CORP (EP): Free Stock Analysis Report
ENTERPRISE PROD (EPD): Free Stock Analysis Report
PLAINS ALL AMER (PAA): Free Stock Analysis Report
SUNOCO LOGISTIC (SXL): Free Stock Analysis Report
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