Following ample receipt of binding commitments, Sunoco Logistics Partners L.P. (SXL) announced plans to move ahead with the phase 1 of the Permian Express pipeline project. The binding season is still on and will close on September 6, 2012.
The pipeline – targeted to increase the flow of crude oil from west Texas to Gulf Coast markets – will be divided into two phases. Sunoco expects to start the first part of Phase I in the first quarter of 2013, with an initial capacity of 90,000 barrels per day of crude transporting from Wichita Falls, Texas to the Nederland/Beaumont, Texas markets.
The pipeline is expected to reach the full capacity of 150,000 barrels per day within 12 to 18 months. The transportation capacity of Permian Express is expandable up to 350,000 barrels per day.
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 center St. James, Louisiana via a network of new and existing pipelines.
The Permian Express project will render 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. (SUN) – currently maintains a Zacks #1 Rank, which is equivalent to a short-term Strong Buy rating. Considering the fundamentals, we maintain our long-term Outperform recommendation on the stock.
With its stable fee-based revenue, geographically-diverse assets and strong business fundamentals, Sunoco Logistics offers investors an opportunity to capture income growth through steadily rising cash distributions and capital appreciation.
Over the past few years, Sunoco has also consolidated its position in the midstream business, which was achieved through a combination of organic efforts and accretive acquisitions.
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