The midstream sector in Texas is still in the midst of what seems to be a never-ending build-out of new pipelines, storage terminals and export docks, all aimed at keeping pace with rising production and refining volumes and the increasing need to move incremental output to foreign markets. Given the understandable desire of midstream companies to earn revenue and profits multiple times as hydrocarbons move from the lease to end-users, it’s not surprising to find midstreamers at work on a variety of projects along the way. A prime example would be NuStar Energy, whose capital spending plan for 2019-20 is focused on helping to resolve three bottlenecks: between its crude oil gathering system and takeaway pipelines in the Permian, between takeaway pipes and export docks in the Corpus Christi area, and between South Texas refineries and refined products customers in Mexico. Today, we look at a leading midstreamer’s multifaceted expansion effort in the Lone Star State.
It’s fair to say that the Shale Revolution changed everything, and that its application to the Permian took it all up a few notches. For the past four years in particular, the expectation — and then, the reality — of phenomenal production growth in West Texas and southeastern New Mexico has spurred the development of many new gathering systems for crude oil and natural gas, as well as new gas processing plants, takeaway pipeline capacity, fractionation plants, refinery capacity, export docks and liquefaction trains — new refined-product pipeline capacity too. And don’t forget new storage tanks and new steam crackers. Amazingly, after all that’s been accomplished on the midstream front since the start of 2016, there’s still a lot more to do, as evidenced by NuStar Energy’s capital expenditure plan for 2019-20. We should note that, in a new asset-by-asset analysis of midstream companies, our friends at East Daley Capital forecasted that NuStar’s 2020 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) will exceed the consensus view by more than 6% — a larger positive variance than all but one of the 24 midstreamers studied.
Substantial portions of NuStar’s capex are being spent on projects that will help move more Permian crude from wells in the Permian’s Midland Basin to takeaway pipelines, and from those same takeaway pipes to export terminals in Corpus Christi and nearby Ingleside, TX, including NuStar’s own North Beach terminal along the Corpus Christi Ship Channel. Additional funds are earmarked for expanding North Beach’s storage capacity, and for increasing the company’s ability to transport gasoline and diesel from South Texas to northern Mexico. We’ll discuss these efforts one by one.
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