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Tallgrass Makes 2 Acquisitions and Significant Developments


Midstream oil firm Tallgrass Energy Partners, LP TEP has recently reported that the partnership has agreed to make two acquisitions through its subsidiary, Tallgrass Terminals LLC. The firm has also taken a few commercial development steps to increase its bouquet of various services.

Pawnee Terminal Acquisition and Others

The partnership will buy 51% membership interest in the crude oil terminal at Pawnee, CO from Zenith Energy for around $31 million. The terminal serves as an injection point of the partnership's Pony Express Northeast Colorado Lateral (“NECL”) with a storage capacity of 300,000 barrels of crude oil. The NECL has around 90,000 barrels per day (bpd) minimum volume commitments. The deal will provide NECL with commercial and operational synergies and also benefit the adjacent crude oil producers. The deal is expected to be closed in the first quarter of 2018.

Apart from this acquisition, Tallgrass made a commercial development and an extension to further more diversify the services offered by NECL. Through a successful binding open season, Tallgrass secured shipper contracts for the 55-mile pipeline extension. Operation on the 40,000 barrels per day extension is expected to begin in April 2018.

Moreover, crude shippers of NECL drafted around 325,000 barrels per day consignment for January 2018, numerically, the highest per day in a month so far. Additionally, Tallgrass' Holly Frontier El Dorado and CHS McPherson, Kan. refinery connections are ready for use and coming online this month only. This will enable the clients to ship more than 300,000 barrels per day to the refineries connected to NECL.

Deeprock North Acquisition

For $19.5 million, Tallgrass Terminals acquired 38% stake in Deeprock North, LLC, which holds a crude oil terminal in North Cushing, OK. The terminal is contiguous to the crude oil terminal facility of Deeprock Development, LLC, a subsidiary of Tallgrass Terminals. The deal helped Deeprock Development merge with Deeprock North. Tallgrass Terminals currently holds about 60% of the combined entity, enabling it to possess a large and diverse terminalling complex. Following the merger, the complex now has a total storage capacity of 4 million barrels.

About Tallgrass and Zacks Rank

Tallgrass owns, operates, acquires and develops midstream energy assets primarily in North America. It provides natural gas transportation and storage services for customers in the Rocky Mountain and Midwest regions of the United States through pipelines and natural gas processing assets. The partnership is based in Overland Park, KS.

Price Performance

Tallgrass has lost 2.93% in the last year compared with 0.4% growth of its industry.

Zacks Rank and Stocks to Consider

Tallgrass has a Zacks Rank #3 (Hold). Some better-ranked stocks in the oil and energy sector are Northern Oil and Gas, Inc. NOG Bonanza Creek Energy, Inc. BCEI and Delek US Holdings, Inc. DK, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Minnetonka, MN-based Northern Oil and Gas is an independent energy company. Its sales for the fourth quarter of 2017 are expected to grow 54.5% year over year. The company pulled off an average positive earnings surprise of 175% in the last four quarters.

Bonanza Creek Energy, based in Denver, CO, is an exploration and a production company. Its earnings for 2017 are expected to skyrocket 100.6% year over year. The company delivered a positive earnings surprise of 252.6% in the third quarter of 2017.

Brentwood, TN-based Delek is an integrated energy company. Its sales for the fourth quarter 2017 are expected to surge 90.3% year over year. The company came up with a positive earnings surprise of 19.1% in the third quarter of 2017.

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