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Tallgrass Energy Raises Stake in Rockies Express Pipeline

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Midstream energy player Tallgrass Energy Partners, LP recently acquired 25% stake in the interstate pipeline company, Rockies Express Pipeline LLC which is a subsidiary of Tallgrass Development, LP, the pipeline’s operator. 

Rockies Express Pipeline develops and owns Rockies Express, a natural gas pipeline system that provides transportation from Colorado to Ohio. The company provides firm transportation services, interruptible transportation services, park and loan services, pooling and wheeling services, and booster compression services.

The deal is valued at $400 million and will increase Tallgrass Energy’s ownership stakes in Rockies Express Pipeline to 50%.  The agreement is likely to result in value addition for stakeholders of Tallgrass Energy. The partnership intends to enhance its quarterly distributions by 10 cents per unit for the second and the third quarter of this year.

Notably, Tallgrass Energy Partners is also slated to receive 50% share of an expected $150 million that is to be paid by former Rockies Express Pipeline shipper Ultra Petroleum Corp. , which recently won court’s approval on Chapter 11 exit plan. The cash payment is part of the terms of settlement in a breach of contract claim against Ultra Resources, a unit of Ultra Petroleum.

Zacks Rank and Other Stocks to Consider

Tallgrass Energy owns, operates, acquires and develops midstream energy assets primarily in North America. It provides natural gas transportation and storage services for customers in the Rocky Mountain and Midwest regions of the United States through pipelines and natural gas processing assets.

The partnership outperformed the Zacks categorized Oil and Gas Production and Pipelines industry over the prior three months. During the period, while units of Tallgrass Energy rallied by 12%, the broader industry declined 0.5%. 

The partnership currently carries a Zacks Rank #2 (Buy).

Other favorably placed stocks in the broader industry include Antero Resources Corporation (AR - Free Report) and Pioneer Natural Resources Company (PXD - Free Report) . Both the companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Antero Resources reported positive earnings surprise in each of the preceding four quarters, the average being 239.10%.

Pioneer Natural Resources is expected to deliver year-over-year growth of 1118.6% in its earnings in 2017.

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