Plains All American Pipeline PAA further expanded its existing operations through the acquisition of Legion Terminals, LLC. This acquisition will provide Plains All American Pipeline (“Plains”) the right to utilize Legion Terminals’ strategically placed crude oil terminal under construction in Johnson’s Corner, McKenzie County, ND.
The terminal is expected to start commercial operation from the third quarter of 2015 and act as a crude oil logistics hub in Williston Basin. The terminal has 500,000 barrels of crude oil storage, pipeline interconnects, truck facilities and other associated assets. The terminal even has the permission to increase storage capacity to 2 million barrels.
Williston Basin is rich in natural gas and oil reserves and production from this region is expected to go up further in the coming years. Our assessment that the demand for midstream services will continue to increase in this region is based on a report from the U.S. Energy Information Administration (“EIA”) pointing that North Dakota’s proved oil reserves had already surpassed federal offshore reserves in the Gulf of Mexico.
This new terminal is located near Plains’ existing assets in Williston Basin which in a way will increase the penetration of its services in this fossil fuel rich region. Plains’ Trenton crude oil gathering system and Manitou and Van Hook crude-by-rail facilities are all located within 50 miles of the terminal. This will further increase the importance and marketability of this terminal.
Plains is equally focused on its operations in other resource rich regions. In Feb 2015, Plains announced its plans to build two new pipelines and associated gathering systems in the West Texas-based Delaware Basin, a part of the Permian Basin (read : Plains All American to Build 2 Pipelines in Delaware Basin).
The shale production boom has spurred demand for midstream services. The need for transportation has led to the creation of new MLPs by energy companies, primarily concentrating on the development of pipelines. We believe Plains with its widespread assets and strategic additions is quite well placed to benefit from the shale boom in the U.S.
Plains currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include Delek Logistics Partners, LP DKL, EnLink Midstream Partners, LP ENLK and Sunoco Logistics Partners L.P. SXL. All three stocks carry a Zacks Rank #2 (Buy).
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