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BP Midstream's $468M Asset Purchase to Deliver Organic Growth

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BP Midstream Partners LP (BPMP - Free Report) announced the purchase of stakes in Mardi Gras Transportation System Company LLC, URSA Oil Pipeline Company LLC and KM-Phoenix Holdings LLC.   

The acquisition from BP plc’s (BP - Free Report) indirect wholly-owned affiliates was valued at $468 million. The entire cash payment was financed through the revolving credit facility of the partnership.

With the transaction, the partnership is expected to boost its stake in Mardi Gras to 65% from 20%. The remaining 35% stake will likely be retained by the British integrated energy player. The addition to the portfolio of the midstream energy firm will also comprise 22.6916% holdings of BP in the Ursa Oil Pipeline along with 25% stake of the energy major in KM-Phoenix Holdings.

BP Midstream Partners expects the acquisitions to prove immediately accretive to unitholder’s distributable cash flow. In fact, the partnership raised its outlook for unitholder’s cash available for distribution through 2018 from $130-$135 million to $140-$145 million.  

The midstream energy player added that the purchase of the premium properties will likely boost its 2019 distribution by mid-teens. Importantly, the acquisitions will provide the midstream energy firm with prospects for organic growth without significant capital spending.

Currently, BP Midstream Partners carries a Zacks Rank #3 (Hold), while its parent BP has a Zacks Rank #2 (Buy).

Investors could also consider prospective stocks likeShell Midstream Partners LP (SHLX - Free Report) , and Petroleo Brasileiro S.A. or Petrobras (PBR - Free Report) . Both Shell Midstream Partners and Petrobras sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shell Midstream Partners has an average positive earnings surprise of 7.9% for the last four quarters.

Petrobras’ bottom line beat the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 10.4%.

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