San Antonio-based publicly traded partnership NuStar Energy LP (NS) and a unit of the Mexican state-owned petroleum company Pemex has signed a letter of intent to form a joint venture (JV) partnership that will work toward development of pipeline infrastructure assets.
The JV will build pipelines and storage facilities to transport liquefied petroleum gas (LPG) and refined products to Nuevo Laredo and Burgos-Reynosa in Mexico from Mont Belvieu and Corpus Christi in Texas. Moreover, NuStar will be responsible for development and operation of these assets, which will be integrated with the company’s existing infrastructure. On the other hand, PMI, the Pemex unit will contribute to the JV by providing throughput commitments for the project.
The recent change in Mexico’s energy reforms to meet the nation’s growing demand has led to this partnership – the first between energy companies in the U.S. and Mexico. The new reform welcomes foreign investment in Mexico’s energy sector. The JV will give Mexico access to several refiners across the U.S.
The pipeline assets are likely to be operational by the latter half of 2016. Management at NusStar expects the deal to be immediately accretive for both the parties.
Following the positive announcement, shares of NuStar surged over 8% in the NYSE to close at $59.60.
NuStar is slated to report third-quarter results before the start of trading on Oct 31. The Zacks Consensus Estimate for the quarter is currently pegged at 60 cents per share.
Currently, NuStar carries a Zacks Rank #3 (Hold). Meanwhile, one could consider better-ranked players from same industry like Delek Logistics Partners, LP (DKL), Enbridge Energy Management LLC (EEQ) and Rose Rock Midstream, L.P. (RRMS). All these stocks sport a Zacks Rank #1 (Strong Buy).
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