Pipeline operator Magellan Midstream Partners LP (MMP) has completed its purchase of Rocky Mountain pipeline properties from Plains All American Pipeline LP (PAA). The deal was signed on Feb 22, 2013.
Magellan has invested roughly $135 million on the pipeline and has financed the purchase primarily through debt. The 550-mile property has 4 terminals with a storage capacity of 1.7 million barrels. The system carries refined fuels to South Dakota, Colorado and Wyoming.
Management believes this purchase will benefit the partnership with immediate increase in cash flow.
Last month, Magellan reported third-quarter 2013 earnings per unit of 54 cents (excluding mark-to-market commodity-related pricing adjustments), surpassing the prior-year quarter’s adjusted profit of 35 cents on strong segmental performances. However, the results failed to beat the Zacks Consensus Estimate of 59 cents. A rise in expenses could be held responsible for the miss.
Tulsa, Oklahoma-based Magellan is a master limited partnership (MLP) that owns an attractive portfolio of energy infrastructure assets which generate stable and recurring fee- and tariff-based revenues. This includes the longest U.S. refined petroleum products pipeline system, access to more than 40% of refining capacity in the continental U.S. along with imports, and 85 petroleum terminals with more than 80 million barrels of storage.
Magellan currently holds a Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next one to three months.
One can also look at energy firms like VOC Energy Trust (VOC) and Matador Resources Company (MTDR) that offer value. Both the stocks sport a Zacks Rank #1 (Strong Buy).
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