Magellan Midstream Partners, L.P. (MMP): Will Changes in Midstream Leave This Company Behind?

The company has plans to convert its longhorn pipeline to deliver 225,000 barrels per day of Permian crude to refineries in the Houston area. It also has partnered with Occidental Petroleum Corporation (NYSE:OXY) to construct the BridgeTex pipeline, another Permian-to-Houston pipeline that will provide up to 300,000 bpd capacity. Magellan certainly picked the right dance partner for the Permian, as Occidental is the largest producer in the Permian Basin by a wide margin.

For investors who were concerned that a refined product-heavy infrastructure wouldn’t be sustainable, the move to build out these Permian pipelines should be encouraging. These two pipelines are a sure sign that the company understands the market shifts in the industry. It’s likely that this move will be the driving force behind the company’s growth. When committing to more than 500,000 bpd from a single shale play, it’s a smart decision to work with the region’s dominant player. If refined product demand continues to decline, look for Magellan to convert some of its other pipelines for crude transportation.

The article Will Changes in Midstream Leave This Company Behind? originally appeared on Fool.com and is written by Tyler Crowe.

Fool contributor Tyler Crowe has no position in any stocks mentioned.You can follow him at Fool.com under the handle TMFDirtyBird, on Google +, or on Twitter: @TylerCroweFool. The Motley Fool recommends Magellan Midstream Partners.

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