Energy pipelines and terminals operator, Sunoco Logistics Partners LP (SXL) recently declared the start of a binding open season from May 14, 2013, by its subsidiary Sunoco Pipeline LP for its proposed Eaglebine Express pipeline.
The proposed project would transport the growing crude oil output in Eaglebine and Woodbine areas to Nederland, Texas. This system will also carry crude oil to Sunoco Logistics’ Nederland terminal.
As part of the project, this pipeline will be connected to Sunoco Logistics’ existing refined-products MagTex pipeline in Hearne, Texas. The pipeline would then be transformed to a crude oil service, reversed and then attached to the Sunoco Logistics’ Nederland terminal.
Sunoco Logistics added that the pipeline is expected to have a capacity of roughly 60,000 barrels per day and expects it to come online in 2014.
The partnership currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Last week, Sunoco Logistics posted strong first-quarter 2013 results on the back of robust performance by the Crude Oil Pipeline, Terminal Facilities and Crude Oil Acquisition and Marketing segments, together with lower operating costs. Its diluted earnings per unit came in at $1.09, significantly ahead of the Zacks Consensus Estimate of 86 cents and above the year-ago earnings of 77 cents.
With its low-risk and stable cash flow-generating energy infrastructure assets, Sunoco Logistics offers investors an opportunity to capture income growth through steadily rising cash distribution and capital appreciation.
However, weak refined products’ demand and refinery downtime – which adversely affects pipeline and terminal throughput – may present a risk to the cash flow estimates and lower Sunoco Logistics’ distribution growth rate.
Meanwhile, there are other oil and gas pipeline master limited partnerships (MLP) that are expected to perform better in the short term. These include Enbridge Energy Management LLC (EEQ) and Summit Midstream Partners LP (SMLP) with Zacks Rank #2 (Buy) and Delek Logistics Partners LP (DKL) with Zacks Rank #1 (Strong Buy).
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