Western Refining Mulls Delaware Basin Pipeline - Analyst Blog

Energy downstream operator Western Refining Inc. WNR is mulling to lay a 40-mile, 12-inch crude oil pipeline in Texas' Delaware Basin. The project, subject to requisite approvals, will link sister concern Western Refining Logistics L.P.'s WNRL existing Mason Station crude oil gathering facility in Reeves County, Texas, with a new terminal at Wink Station in Winkler County, Texas. The pipeline – scheduled to come online by mid-2015 – will be capable of carrying 125,000 barrels of liquids daily to common carrier conduits at Wink.  

Through this new initiative, Western Refining aims to enhance the Western Refining Logistics-operated $60 million Delaware Basin crude oil system in West Texas. Western refining hopes to capitalize on the rapid growth in Delaware Basin's liquids output by expanding its shale oil delivery capabilities, while utilizing the company's locational advantage and existing infrastructure.    

Incorporated in 2005, El Paso, Texas-headquartered Western Refining is an independent refiner and marketer of refined petroleum products in the Southwestern and Mid-Atlantic regions of the U.S.

Western Refining's attractiveness stems for its shareholder friendly financial policy, considerable success in reducing debt and the initiatives to improve reliability/reduce operating costs.

However, the company is also faced with volatile industry fundamentals and limited geographic diversification, which may limit its ability to generate positive earnings surprises.

As a result, Western Refining, which plans to release its first quarter results on May 6, currently retains a Zacks Rank #3 (Hold), implying that it is expected perform in line with the broader U.S. equity market over the next one to three months.

However, some better-ranked domestic downstream energy stocks include Marathon Petroleum Corp. MPC and Valero Energy Corp. VLO. Both the firms hold a Zacks Rank #2 (Buy).