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Tesoro Logistics Leads in Capex Growth: What Does This Mean?

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Capex guidance

Distribution growth is an important driver of the valuation for a MLP (master limited partnership). In order to grow their distributions, MLPs are required to look for opportunities that can add to their distributable cash flows. In this part, we’ll look into capex (capital expenditure) targets and major organic projects for Buckeye Partners (BPL), Sunoco Logistics (SXL), Tesoro Logistics (TLLP), and NuStar Energy (NS).

To some extent, capex growth might depend on the size of a company. It becomes difficult for bigger companies to find attractive investment opportunities that generate acceptable returns, especially in the midst of weakness in crude oil (USO) and natural gas prices (UNG).

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Tesoro Logistics’ organic capital spending is expected to grow 95% YoY (year-over-year) by the end of 2015—compared to 2014. In contrast, Sunoco Logistics’ is a bigger MLP in terms of enterprise value. It has the lowest expected capex growth of 6.5%. Buckeye Partners and NuStar Energy’s planned organic capex is expected to grow 22.4% YoY and 40% YoY, respectively.

Together, these four companies account for ~15.11% of the Alerian MLP ETF (AMLP). Sunoco Logistics and Tesoro Logistics are subsidiaries of Energy Transfer Partners (ETP) and Tesoro (TSO).

Major organic projects

  • Buckeye Partners’ major capital spending is expected to be utilized in its BTP (Buckeye Texas Partners) expansion. BTP is part of Buckeye Partners’ Global Marine Terminals division. Its assets will include a vertically integrated system of midstream assets strategically located in Corpus Christi, Texas, and the Eagle Ford Shale.
  • Sunoco Logistics is expected to spend on its previously announced Mariner NGL (natural gas liquid) and crude oil infrastructure projects.
  • Tesoro Logistics will spend an estimated $150 million on the Connolly Gathering System. The system will gather crude oil from various points in Dunn County, North Dakota, for delivery at the existing Connolly Station. It’s expected to have a capacity of ~60,000 bpd (barrels per day).
  • NuStar Energy’s growth capital spending is expected to be used primarily for its South Texas Crude Oil Pipeline Expansion project.
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