| Deciphering Sunoco Logistics’ Commodity Price Management Strategy | |
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A Review of Sunoco Logistics Partners: Decent Expectations for 2015 (Part 5 of 17) (Continued from Part 4) Commodity price management
We discussed Sunoco Logistics Partners’ (SXL) crude oil acquisition and marketing and terminals segments in the previous parts of this series. Here, we’ll look at how the company limits the effect of commodity price fluctuations.
Since Sunoco Logistics’ acquisition of the Marcus Hook Industrial Complex in 2013, it provides an array of natural gas liquids services like butane blending. Sunoco manages its commodity price volatility by engaging in buy and sale contracts and speculative buying and selling. The company also engages in derivatives contracts, which hedge against the commodity price volatility.
Sunoco’s major customer
The majority of Sunoco Logistics’ crude oil terminal throughput is tied to a 10-year contract with Pioneer Energy Services’ (PES) refining operation.
Shale supply to grow
As described in the graph above, NGL supply from Marcellus Shale across Pennsylvania, West Virginia, and Ohio, and the Utica Shale located in Pennsylvania and Ohio is projected to grow 0.8 million barrels per day (or Mmbpd) by 2016 from ~0.6 Mmbpd in 2014, an increase of ~33%.
The majority of the growth is expected to occur in ethane production. Sunoco Logistics, which caters to these regions, will significantly benefit if the growth takes place. Some major producers in the Utica and the Marcellus Shales include Cabot Oil & Gas (COG), CONSOL Energy (CNX), and Anadarko Petroleum (APC). These companies together account for 5.4% of the Energy Select Sector SPDR ETF (XLE).
Continue to Part 6 Browse this series on Market Realist:
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Anadarko
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CODE : APC |
ISIN : US0325111070 |
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ProfileMarket IndicatorsVALUE : Projects & res.Press releasesAnnual reportRISK : Asset profileContact Cpy |
Anadarko is a exploration company based in Canada. Anadarko is listed in Germany and in United States of America. Its market capitalisation is US$ 38.6 billions as of today (€ 34.5 billions). Its stock quote reached its lowest recent point on May 12, 1995 at US$ 10.00, and its highest recent level on May 23, 2014 at US$ 99.93. Anadarko has 531 000 000 shares outstanding. |