Oiltanking Partners LP stands to benefit from the growing supply of liquid hydrocarbons making their way to the Houston area now that new pipeline capacity has alleviated the bottlenecks that led to a prolonged oil glut at the delivery hub in Cushing, Okla.
The MLP owns significant storage capacity on the Houston Ship Channel and in Beaumont, Texas, and has ample opportunity to expand these facilities to take advantage of robust customer demand.
Oiltanking Partners highlighted a number of these growth opportunities during its third-quarter earnings call.
For example, management announced that the firm will proceed with the $101 million construction of another 3.5 million barrels of storage at its Appelt complex, a project that would increase the facility’s capacity to 10 million barrels.
The publicly traded partnership is also eyeing another 5 million to 6 million of new storage capacity in Houston to accommodate incoming volumes from TransCanada Corp’s (TSX: TRP, NYSE: TRP) Gulf Coast Pipeline project, the expansion of Enbridge (TSX: ENB, NYSE: ENB) and Enterprise Products Partners LP’s (NYSE: EPD) Seaway pipeline.
Management is also in talks with Canadian and Gulf of Mexico producers about building another 3 million to 5 million barrels of storage in Beaumont to handle volumes from the Royal Dutch Shell’s (LSE: RDSA, RDSB; NYSE: RDS A, RDS B) Houma-to-Houston pipeline.
Meanwhile, the MLP announced two additional pipeline projects that will increase the inbound and outbound connectivity of its storage assets, increasing their appeal to existing and new customers.
We also like the company’s exposure to rising exports of propane and butane via a recent deal with Enterprise Products Partners LP (NYSE: EPD); management indicated that increased volumes and higher margin sharing at this operation fueled a $17.5 million increase in throughput fees relative to 2012.
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Elliott and Roger on Mar. 30, 2017
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