That Escalated Quickly

BridgeTex is a JV pipeline from Colorado City to East Houston owned by MMP/PAA with 400 Mb/d of capacity. From 1Q16-1Q17, the pipeline was range-bound between 70%-74% utilization. Historically, BridgeTex has not received much in the way of marketed volumes from its JV owners but that changed recently when MMP began marketing efforts on BridgeTex. As discussed in EDC’s 3Q17 Consensus Comparison Report ahead of earnings season, the Midland to Houston crude oil differential incentivizes marketing barrels along that route. Price differentials widened following Hurricane Harvey and the spreads persisted because of limited crude oil takeaway capacity in the face of continued Permian production growth. Partly alleviating takeaway constraints is EPD’s Midland-to-Sealy pipeline that came online this quarter. However, the 450 Mb/d pipeline will be limited in its capacity until related tanks and pumps supporting the pipeline are in place in 2Q18. The gradual increase in EPD’s operational capability is likely why MMP’s management team provided such a bullish 26% growth rate in volumes from 3Q17 to 4Q17 on the heels of already significant 2Q17 to 3Q17 growth of 11%. (Tickers: MMP, PAA, EPD)