Andeavor Boosts Permian Foothold With Rangeland II Buyout

In a bid to bolster its foothold in the Permian play, Andeavor (NYSE:ANDV) recently acquired Rangeland Energy II, LLC. Financial details of the transaction have been kept under wraps. Subject to satisfactory closing conditions and regulatory approvals, the deal is set for closure by March this year.

Per the deal, Andeavor will acquire Rangeland II’s assets in Midland and Delaware Basins, which include storage tanks and frac sand terminal along with 110-mile Rio Pipeline with throughput capacity of 145,000 barrels per day.

Post the acquisition, Andeavor intends to integrate the crude oil infrastructure with its Conan Crude Oil Gathering System, which is currently under construction.The $225 million Conan pipeline is around 130 miles long with a capacity to transport around 250,000 barrels of oil a day.

The integration of two pipeline systems will provide producers access to multiple markets and also support Andeavor's development of additional gathering systems in the area. It will also boost the commercial opportunities by providing direct access to the Midland Basin. Eventually, Andeavor intends to drop down the pipeline assets to its midstream spin-off Andeavor Logistics, LP. (NYSE:ANDX) .

Apart from bolstering the network of assets, the acquisition will enhance its geographic footprint in the prolific Permian Basin and lead to several commercial and financial synergies. As it is, over the last two years despite the industry’s downturn, the energy companies like Exxon Mobil Corporation (NYSE:XOM) , Noble Energy (NYSE:NBL), Inc. and many others have been increasing their investment in the prolific Permian Basin owing to its lower costs and widespread infrastructure.

Zacks Rank and Key Picks

Headquartered in Texas, Andeavor is one of the world’s largest independent refiners. Driven by organic growth, major capital projects, dropdowns, mergers and acquisitions, the company intends to grow its EBITDA by 45% over the next three years. Andeavor expects synergies from Western Refining buyout to be fully achieved by June 2019. The company currently carries a Zacks Rank #3 (Hold).

A top-ranked player in the same industry is Delek US Holdings, Inc. (NYSE:DK) , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Delek US Holdings is expected to witness year-over-year earnings growth of 103.61% in 2018.

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