After a great 2012 in the pipeline business, Plains All American Pipeline, L.P. (PAA) completed a transaction to increase the focus on rail transportation growth. The company finalized a $500M deal to acquire several loading facilities for railroads though the existing enterprise value of nearly $22B limits the impact of this rail move.
Plains All American engages in the transportation, storage, terminalling, and marketing of crude oil, refined products, and liquid petroleum gas (LPG) products in the United States and Canada.
The move highlights the transformational currents under cutting the pipeline business. As crude oil has been unable to transverse the current pipeline system to reach the refineries on the coasts, the railroads have stepped up with more direct routes that bypass the congested Cushing, OK oil hub. Not only is it a boon to railroads struggling with weak coal shipments, but exploration and refinery companies are access to better pricing than currently available.
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