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USD Partners LP (NYSE:USDP), a master limited partnership that acquires, develops and operates energy-related logistics assets, stands to benefit from the expansion in crude pricing differentials between Western Canadian Sour crude and WTI. according to B. Riley.
The Analyst
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B. Riley FBR's Robert Balsamo upgraded USD Partner from Neutral to Buy with a price target lifted from $11 to $14.
The Thesis
USD Partners' Hardisty Terminal in Western Canada is one of the most important crude oil hubs in Canada for delivery to refineries in the Midwest and Gulf Coast, Balsamo said in a note. As it stands now, Canadian crude oil is selling at a "significant" discount to WTI due to a lack of a takeaway capacity.
The price disparity between Canadian crude and WTI will likely remain through at least 2023 which naturally incentivize shippers to enter long-term contracts with USD Partners' Hardisty Terminal, the analyst wrote. In fact, many of USD Partners' contracts with shippers will expire in 2019 and 2020 but new market dynamics, including ongoing delays in new pipeline construction, supports demand for the terminal beyond the next two years.
The analyst's stance of ongoing contract extensions with multiple shippers is inline with the company's confirmation on June 4 in which it secured a new customer for a five-year commitment at the Hardisty Terminal.
Price Action
Shares of USD Partners were trading higher by 1 percent Monday afternoon.
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Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.