Southern Union Company (SUG) received approval for the construction of the $235 million Red Bluff Project. The company’s midstream segment, Southern Union Gas Services (“SUGS”) will construct a natural gas processing plant with a capacity of 200 million cubic feet per day (MMcf/d) and associated gathering, compression and treating facilities.
As a part of the Red Bluff project, SUGS will construct approximately 60 miles of pipeline to deliver up to 20,000 bpd of natural gas liquids (NGL) into Lone Star’s Permian to Mt. Belvieu pipeline expansion, under a 15-year firm arrangement. Lone Star NGL LLC is a joint venture between Energy Transfer Partners LP (ETP) and Regency Energy Partners LP (RGP). The project is expected to be completed in mid-2013.
Increase in Avalon play production, along with growing producer interest and success in the Bone Spring and Wolfcamp plays, calls for the need for further expansion of gathering, treating and processing services in the area. The new facilities will enable SUGS to accommodate natural gas production from existing and future producer commitments in the rapidly expanding Avalon, Bone Spring and Wolfcamp plays of West Texas and Southeast New Mexico.
Currently, both Energy Transfer Equity, L.P. (ETE) and Williams Companies Inc. (WMB) are in the race to buy Southern Union. Whosoever clinches the deal will become one of the largest natural gas infrastructure players in the U.S.
Southern Union Company owns one of the largest interstate pipeline networks in the U.S. and one of the largest LNG import terminals in North America. With substantial infrastructure already in place and a disciplined commitment to growth, SUGS is well positioned to continue providing vital midstream services for its Permian Basin customers.
However, valuation continues to be restricted by the company’s dependence on outside funds to follow its expansion programs, as well as seasonality in its pipeline business. The company presently retains a short-term Zacks #2 Rank (Buy). We have a long-term Neutral recommendation on the stock.
Southern Union Company, headquartered in Houston, is one of the nation’s leading diversified natural gas companies, engaged primarily in the transportation, storage, gathering, processing and distribution of natural gas. The company owns and operates one of the nation’s largest natural gas pipeline systems with more than 20,000 miles of gathering and transportation pipelines and one of North America’s largest liquefied natural gas import terminals, along with serving more than half a million natural gas end-user customers in Missouri and Massachusetts.
ENERGY TRAN EQT (ETE): Free Stock Analysis Report
ENERGY TRAN PTR (ETP): Free Stock Analysis Report
REGENCY ENERGY (RGP): Free Stock Analysis Report
SOUTHN UNION CO (SUG): Free Stock Analysis Report
WILLIAMS COS (WMB): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment