Rose Rock Midstream Touches 52 Week High - Analyst Blog

On May 19, 2014, shares of pipeline service provider Rose Rock Midstream, L.P. RRMS touched a 52-week high of $45.15 driven by the start-up of several strategic growth projects, exposure to high-return assets and attractive distribution payments. The shares finally closed at $44.66, up 21.5% from the year-ago closing price.

The partnership is positioned in the key asset plays of Denver/Julesburg (DJ) Basin, Bakken crude oil and Niobrara formation which are offering plenty of growth opportunities. Encouraging resource potential from these plays has drove upstream activities by producers, which in turn has led to a demand for midstream services.

This explains Rose Rock Midstream's robust top line upswing of 69.9% in the first quarter 2014. The service initiation of the Green Mountain pipeline and Rose Valley 1 has offered critical thrust to the partnership's growth stream in the early months of 2014.

The partnership continues to maintain a strong balance sheet position. Operating cash flow during the first quarter increased sharply by 85.9% to $18.4 million. This positive cash flow generation has allowed Rose Rock Midstream to hike its quarterly distribution by 6.5% to 49.5 cents per unit in Apr 2014 which has retained investors' confidence on the stock.

The partnership continued focus on expanding its pipeline systems will boost its midstream capabilities. For 2014, the partnership intends to make capital investments worth $415 million.

Two of Rose Rock Midstream's premier asset, the White Cliff pipeline in the DJ basin and the SemCAMS Gathering pipeline in Canada are being prepped up for completion in 2014. These programs will further enhance the partnership's delivering capacity.

The long-term picture looks promising for Rose Rock Midstream as a recent study by the ICF International revealed that midstream infrastructure requirements for natural gas in North America will be 303,000 miles through 2035. The gradual shift to unconventional resource and tight oil plays will primarily drive pipeline constructions.

Rose Rock Midstream, L.P. currently holds a Zacks Rank #3 (Hold). Other well-placed midstream operators include Delek Logistics Partners, LP DKL, Boardwalk Pipeline Partners, LP BWP and Targa Resources Partners LP NGLS. All the above stocks currently hold a Zacks Rank #1 (Strong Buy).