NuStar (NS) Aims At Valley Pipeline Expansion In Mexico

NuStar Energy L.P. (NYSE:NS) recently commenced a binding open season for additional capacity of the Valley Pipeline System. The pipeline delivers gasoline, diesel and other fuels from refineries at Corpus Christi to Brownsville, Edinburg, and Harlingen in Texas.

The partnership plans to double the capacity of the 196-mile pipeline from 45,000 barrels per day (BPD) to 90,000 BPD via building a 75-mile loop between Seeligson and Edinburg in Texas, as well as improving the pumping stations along the pipeline. The partnership intends to secure long-term commitments for 90% of the expanded capacity, while 10% will be available for walk-up customers. The project is expected to come online in third-quarter 2019. The open season is scheduled to close on Jul 12, 2019.

Notably, the project is part of the partnership’s plan to facilitate export of refined products to Northern Mexico, in order to meet the growing demand. The partnership intends to invest around $190 million for improving supply to Northern Mexico. The move will enhance its fee-based transportation assets that support the U.S. and international energy infrastructure, which bodes well for DCFs and revenues.

In addition to the Valley Pipeline expansion project, NuStar is eyeing the execution of the Nuevo Laredo Project for Valero Energy Corporation (NYSE:VLO) , which will enable it to deliver fuel in Mexico more efficiently. The company targets project completion by next February.

Price Performance

NuStar has gained 25.7% year to date compared with 14.3% collective growth of the industry it belongs to.

Zacks Rank and Stocks to Consider

Currently, NuStar carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Enterprise Products Partners L.P. (NYSE:EPD) and Oasis Midstream Partners LP (NYSE:OMP) , each holding a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Enterprise Products’ earnings growth is projected at 10% through 2019.

Oasis Midstream’s earnings growth is projected at 95.6% through 2019.

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