Buckeye to Expand Chicago Complex and Execute Deal With BP

Buckeye Partners, L.P. BPL announced a plan to further expand storage capacity at its Chicago Complex by 600,000 barrels, through investment of $80 million. The expansion of the storage capacity is backed by a long-term agreement with BP plc’s BP unit, BP Products North America, Inc.

Increasing liquid production in the United States and fluctuating liquid prices call for higher storage requirement. Buckeye Partners’ expansion of storage capacity will support the growing needs of its customers.

How the New Expansion Will Help?

Buckeye Partners’ Chicago Complex currently serves nearly 70 different customers with approximately 6.8 million barrels of storage capacity.

This new expansion will further increase the importance of the Chicago Complex and strengthen its position as the premier storage and trading facility in the Chicago area. Given the increasing production in the region, the partnership might need to expand its storage facility again in the complex in the near future.

Increasing Oil Production

Per a recent release from the U.S. Energy Information Administration (“EIA”), annual average crude oil production in the United States touched 9.3 million barrels per day (b/d) in 2017, improving 5% from 2016 levels.

The report also indicates that crude oil production will continue to improve and is expected to average between 10.7 million b/d and 11.3 million b/d in 2018 and 2019, respectively. The rising production level will call for further expansion of the storage capacity and boost revenues of the midstream operators.

Price Movement

In a year’s time, units of Buckeye Partners have lost higher than its industry. The stock has lost 45.4%, wider than the industry’s decline of 28.5%.

Zacks Rank

Buckeye Partners has a Zacks Rank #5 (Strong Sell). Some better-ranked stocks from the same sector are Pioneer Natural Resources Company PXD, sporting a Zacks Rank #1 (Strong Buy) and China Petroleum & Chemical Corporation SNP, having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Pioneer Natural Resources reported an average positive earnings surprise of 66.92% in the last four quarters. Long-term earnings growth is pegged at 12.70%. Its 2018 earnings estimate moved up 58.9% to $6.47 in the last 60 days.

China Petroleum & Chemical Corporation reported an average positive earnings surprise of 492.75% in the last four quarters. Long-term earnings growth is pegged at 6.16%. Its 2018 earnings estimate moved up 1.7% to $7.26 over the last 60 days.

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