Master limited partnership Plains All American Pipeline L.P. (PAA) has agreed to acquire entities holding crude oil gathering and transportation assets from Nexen Holdings U.S.A. Inc. The entities to be acquired primarily serve the Bakken area producers.
The assets to be acquired are primarily located in Northwestern North Dakota and Northeastern Montana. These assets in question include a lease gathering business that currently handles about 55,000 barrels per day; the Robinson Lake pipeline, a FERC regulated 20-mile, 8-inch pipeline that currently handles about 18,000 barrels per day; 8 truck terminals and various other contractual rights.
Plains All American anticipates paying roughly $210 million for these Bakken assets comprising about $170 million for the business and physical assets, and roughly $40 million for nearly 400,000 barrels of inventory and other working capital adjustments.
Plains All American requires to receive approvals from various regulatory bodies for the acquisition. The partnership expects to close the acquisition by year-end 2010.
This acquisition is consistent with Plains All American’s strategy to expand and strengthen its presence in long-lived, growing producing regions. The assets also complement the partnership’s existing Bakken area assets and activities, including the recently proposed Bakken North Pipeline Project.
Going forward, the partnership expects to successfully integrate this suite of well-positioned assets, servicing an expanded customer base, and continuing to grow its Bakken business.
Earlier this month, Plains All American had announced a proposal to reverse its Wascana pipeline system and construct the Bakken North pipeline to provide additional take-away capacity for growing production in the Bakken crude oil producing region.
The Bakken North Project will provide crude oil transportation service from Trenton, North Dakota to Regina, Saskatchewan. Plains All American anticipates placing the Bakken North Project into service in the fourth quarter of 2012, with approximately 50% of the capital being invested in 2011 and 50% in 2012.
The adjusted earnings of Plains All American Pipeline at the end of third-quarter 2010 were 70 cents per unit compared with 59 cents in the year-ago comparable period. The Zacks Consensus Estimates for fourth quarter fiscal 2010, fiscal year 2010 and fiscal year 2011 are 85 cents per unit, $2.86 per unit and $3.14 per unit, respectively.
Plains All American Pipeline currently retains a Zacks #3 Rank (short-term Hold rating). Its closest peers Enterprise Products Partners L.P. (EPD) and Sunoco Logistics Partners L.P. (SXL) also carry a Zacks #3 Rank.
Houston, Texas based Plains All American Pipeline owns assets strategically located in well-established oil producing regions, catering to major U.S. refinery and distribution markets. Other than organic growth opportunities, the partnership also relies on acquisitions to spur growth.
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