3 Pipeline Deals to Watch
Mar 10th 2013 8:00PM
Updated Mar 11th 2013 1:05AM
Energy Fools who haven't been able to tear themselves away from the "will we, won't we?" Keystone XL drama have missed a fair bit of pipeline news already this week. Though the micro story is limited to the companies involved, the details can point to a bigger picture that can affect all energy investors. Let's look at some of this week's action.
Natural gas exports
Kinder Morgan petitioned the Federal Energy Regulatory Commission for authorization to increase its shipments of natural gas from Texas to Mexico. The company's Mier-Monterrey pipeline currently ships 425 million cubic feet of gas per day to the Mexican border, where it connects with a Pemex-owned system. Kinder Morgan wants to boost that amount to 700 mmcf per day. The company hopes to have a decision in hand by June 1.
Mexico will be happy to have the gas. Despite the existence of extensive natural gas reserves -- the Eagle Ford Shale doesn't stop at the border, after all -- the country doesn't have the means to produce the commodity for less than it would cost to buy it from the United States. Until Pemex opens its doors to foreign exploration and production investment, the country will have to be content buying gas from across the border.
NGLs on the go
Boardwalk Pipeline Partners is tag-teaming with Williams to build a natural gas liquids pipeline system from the Utica and Marcellus shales down to the Gulf Coast. The Bluegrass Pipeline would connect Pennsylvania, West Virginia, and Ohio to the petrochemical and refining hubs in Louisiana and Texas. The system would be part new construction and part conversion of an existing natural gas line, with an initial capacity of 200,000 barrels per day.
The fact that part of the planned route already exists enables the joint venture partners to target a completion date sometime in the second half of 2015. Alan Armstrong, the CEO of Williams, anticipates that liquids production in the two shale plays will overwhelm existing infrastructure by 2016.
1 more MLP?
Western Refining is the latest company to announce that it may pursue a midstream spinoff of its oil and logistics assets. The company is currently evaluating its prospects, and if management decides to pursue this option, Western would file a registration statement with the SEC sometime this year.
The market is ripe for MLP spinoffs, and they're proving particularly popular with refiners. Marathon Petroleum has succeeded in its spinoff of MPLX, and Phillips 66 isn't far behind. Western has said its extensive retail network won't be included in the potential MLP. Instead, potential assets for spinoff include four refined products terminals, four asphalt terminals, and crude oil and products pipelines.
These deals are important for the companies involved, but the big picture matters, too. This week alone we're reminded that Mexico needs our gas, and if any U.S. E&P ever gets in there it will make a killing; NGL production continues to rise in the Northeast, which bodes well for an American petrochemical renaissance; and finally, if you haven't considered spinning off a midstream MLP, you're missing out.
It's easy to forget the necessity of midstream operators that seamlessly transport oil and gas throughout the United States. Kinder Morgan is one of these operators, and it's one that investors should commit to memory because of its sheer size -- it's the fourth largest energy company in the U.S. -- not to mention its enormous potential for profits. In The Motley Fool's new premium research report on Kinder Morgan, our top energy analyst breaks down the company's growing opportunity, as well as the risks to watch out for, to uncover whether it's a buy or a sell. To determine whether this dividend giant is right for your portfolio, simply click here now to claim your copy of this invaluable investor's resource.
The article 3 Pipeline Deals to Watch originally appeared on Fool.com.Fool contributor Aimee Duffy has no position in any stocks mentioned. Click here to see her holdings and a short bio. If you have the energy, follow her on Twitter, where she goes by @TMFDuffy. The Motley Fool recommends Kinder Morgan and owns shares of Kinder Morgan and Western Refining. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.