Sunoco Logistics' New Pipeline Plan
by Zacks Equity ResearchJune 25, 2012 | Comments : 0 Recommended this article: (0)
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Sunoco Logistics Partners L.P. ( SXL - Analyst Report ) – a master limited partnership (MLP) – has launched the Permian Express pipeline project, with the target to increase the flow of crude oil from west Texas to Gulf Coast markets. The project will be divided into two phases.
The partnership will start the first part of Phase I within 6 to 9 months with an initial capacity of 90,000 barrels per day of crude transporting from Wichita Falls, Texas to the Nederland/Beaumont, Texas markets.
The 150,000 barrels per day full capacity of the pipeline is expected to be reached within 12 to 18 months. The transportation capacity of Permian Express is expandable up to 350,000 barrels per day.
Sunoco Logistics also plans to reverse its Wortham-to-Wichita Falls pipeline, in order to generate uninterrupted pipeline service from Wichita Falls to Nederland. The partnership will take in account the excess capacity on the southern leg of its West Texas Gulf pipeline system for this development.
To offer the services of the pipeline to customers, Sunoco Logistics will commence the Open Season for Phase I within the next few days. The partnership is offering commitment terms of three, five or seven years for better customer flexibility.
Sunoco Logistics will have Phase II of Permian Express operational in the second half of 2014, with an initial daily takeaway capacity of approximately 200,000 barrels. This phase will witness the delivery of crude oil to the extended eastern refining centers St. James, Louisiana via a network of new and existing pipelines.
As part of Phase II, Sunoco Logistics will likely couple a 300-mile-long pipeline from Colorado City to Wortham, parallel to the existing West Texas Gulf pipeline.
Sunoco Logistics stated that the Permian Express project, although separate, will complement the partnership’s earlier-announced initiatives to boost the West Texas Gulf Pipeline’s daily crude oil supply by at least 100,000 barrels.
Combining this current venture, the crude oil takeaway capacity from West Texas will be expanded by at least 450,000 barrels per day.
We believe that the Permian Express project, along with an extensive and diverse portfolio of refined product and crude oil pipelines and terminal facilities of Sunoco Logistics, will provide the West Texas producers and Gulf Coast refiners a cost effective and flexible operational structure.
Sunoco Logistics Partners L.P. – whose 34% interest, including a 2% general partner interest is owned by Sunoco Inc. ( ) , which currently maintains a Zacks #1 Rank, equivalent to a short-term Strong Buy rating. We are maintaining our Outperform recommendation on the stock over the longer term.
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