Magellan Midstream Riding The Wave Of Rising US Oil Exports

Analysts at UBS turned bullish on Magellan Midstream Partners, L.P. MMP, a limited partnership engaged in the transportation, storage, and distribution of crude, gasoline, and diesel fuel amid a surge in oil exports from the United States.

The firm's Shneur Gershuni upgraded Magellan Midstream's stock from Neutral to Buy with an unchanged $82 price target.

American energy companies are benefiting from a 1,600 percent surge in oil exports over the past four years after the U.S. Congress removed a four-decade old ban on crude experts, Gershuni noted in his report. Meanwhile, domestic oil production continues to ramp and companies are seeing improvements in extraction costs. This trend benefits Magellan Midstream, especially as it's evaluating opportunities in Galena Park and Pasadena Marine where it has a "firm and shadow backlog" of several attractive projects.

Magellan Midstream is expected to provide an update in its second-quarter earnings report (August 2) for information on the expansion of the BridgeTex pipeline.

Also, the next phases for Seabrook and Pasadena serve as potential catalysts for the stock but funding "could be a question" given management's history of not issuing equity.

Finally, Magellan Midstream's stock valuation as measured by 2017E EV/EBITDA and P/DCF remains a premium versus some of its peers but has contracted as of late which makes the stock more attractive at current levels, the analyst concluded.