Why Genesis Energy and Buckeye Partners rely on Eagle Ford and the Permian

Avik Chowdhury
June 3, 2014

Must-know: Why MLPs benefit from the crude oil shale boom (Part 4 of 8)

(Continued from Part 3)

Why the Eagle Ford Basin in Texas is important for Genesis Energy

Genesis Energy L.P. (GEL) is a master limited partnership (or MLP) that operates in the midstream segment of the oil and gas industry in the Gulf Coast region of the United States. The company purchases and sells crude oil gathered from the wellhead, transports it with 100 trucks and trailers, and delivers it via pipelines to refineries. It gathers and transports over 40,000 barrel per day of crude oil through its Texas City terminal project. During 2013, it constructed a truck station and tankage in West Columbia, Texas to provide complementary transportation service for the pipeline system at the Eagle Ford Shale. The company operates in the resource basins located in the Permian Basin in west Texas, the Eagle Ford Shale in south Texas, the Tuscaloosa Marine Shale in south Louisiana, as well as the Niobrara Shale in Colorado and Wyoming.

GEL’s Texas system transports crude oil from West Columbia to several delivery points near Houston, Texas. It receives crude oil from other third-party pipeline connections. In 2013, the company owned 109 miles of pipeline system for a throughput of 51,067 barrels per day. It owns two pipelines with diameters of 8 inches and 18 inches. It also owns a tank storage capacity of approximately 220,000 barrels.

GEL also has crude oil rail loading and unloading facilities located in Walnut Hill, Florida; Wink, Texas; Natchez, Mississippi; and Douglas, Wyoming. It is currently expanding its Walnut Hill, Florida, Wink, Texas, and Natchez, Mississippi facilities to increase railroad car capacity in 1Q14.

Why Eagle Ford is crucial for Buckeye Partners

Buckeye Partners L.P. (BPL) is a MLP that owns and operates an independent liquid petroleum products pipeline system. The company owns approximately 6,000 miles of pipeline located primarily in the northeast and upper Midwest United States.

BPL’s production at the Eagle Ford crude oil gathering pipeline began during 4Q13. Its earnings for the Development & Logistics segment have grown steadily because of a strong project backlog. During 1Q14, the segment received a contract to operate a Permian based pipeline system for a major petrochemical company. These developments helped BPL gain a footprint at the important shale plays. It’s expected to be a major growth driver in the future. Clark Smith, the chief operating officer (or CEO) of BPL, said in the conference call of 1Q14 earnings, “The Development & Logistics segment has steadily grown its earnings and has a strong project backlog. I mentioned last quarter that BDL began operating an Eagle Ford crude oil gathering pipeline. This quarter BDL is awarded a contract to operate a Permian based pipeline system for major petrochemical company. These two important wins have provided us with a footprint in these important shale plays that we will look to use a springboard for further growth.”

The midstream oil companies that engage in transport and logistics of crude oil have been very active for the past five years, as a result of increasing production in the U.S. The master limited partnerships in the midstream space that have benefited the most from the shale oil boom are Enterprise Products Partners L.P. (EPD), Genesis Energy L.P. (GEL), Targa Resources Partners (NGLS), and Plains All American Partners (PAA). These are components of the Alerian MLP ETF (AMLP) and the Global X MLP ETF (MLPA).

Continue to Part 5

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