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If You Run Marathons, You’re a Marathoner

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After announcing plans to acquire the asset last week, MPLX announced its intention to expand the Ozark Pipeline which has current crude capacity of 230 Mb/d from Cushing, OK, to Wood River, IL. MPLX is acquiring the pipeline from Enbridge Energy Partners (EEP), who conducted an open season during 4Q16 to expand the pipeline’s capacity by 100 Mb/d but results from the open season were favorable enough to push a 115 Mb/d expansion, increasing total pipeline capacity to 345 Mb/d by 2Q18. MPLX acquired the pipeline for $220 million, or at a 7.5x cost/EBITDA multiple based on EDC’s 2016 EBITDA estimate of $29 million. Once the expansion is complete, the asset is expected the generate around $44 million in annual EBITDA based on a $1.20/bbl rate on the expansion. MPLX’s filing related to the pipeline expansion explains that the pipeline is currently forced to prorate walk-up volumes, indicating strong demand for transport from Cushing to Wood River. It also supports supply diversity for MPC’s Midwest refining operations, as the Patoka Hub currently receives most of its supply from Canada and North Dakota. The Ozark Pipeline will essentially serve as an extension of the Marathon Pipeline crude oil transportation services, which moves crude oil from Patoka to MPC’s various refineries in Indiana. (Tickers: MPLX, EEP, MPC)

About The Author Justin Carlson

I have over 10 years of experience in data analysis, research, and consulting across the energy sector. I currently serve as Vice President of Research and Managing Director at East Daley Capital, an energy assets research firm that is changing how investors look at midstream energy risk with an asset-driven information service that combines proprietary research with a trusted team of unbiased, experienced energy analysts. My insights and analysis bring greater transparency to the energy financial market by quantifying potential risks by asset and enabling investors to make more informed and accurate projections and investments. Prior to joining East Daley Capital, I was a senior manager at Platts, a division of McGraw Hill Financial, which acquired Bentek Energy, where I was a senior member of the leadership team.