$7.3 Billion Power Move: The Midstream Phoenix Rising from Retail Ashes
There is really big news in the midstream space. Yesterday, Sunoco LP and NuStar Energy L.P. announced that the parties have entered into a definitive agreement whereby Sunoco will acquire NuStar in an all-equity transaction valued at approximately $7.3 billion. About 12 years ago, Sunoco sold off the last of its refineries and essentially self-liquidated into a marketing and retail company. A little over 5 years ago, Sunoco sold off its retail footprint to 7-11 to become a nucleus supply and distribution company. Phoenix rising from the ashes refers to the idea of something being reborn after total destruction, like a comeback so grand it’s simply legendary. Armed with capital from the retail sale and utilizing a skilled management team, Sunoco leveraged their fuel distribution, logistics and infrastructure expertise and slowly began growing their midstream space through targeted acquisitions of storage terminals and cash flow from their niche businesses. It’s a case study example of doing what you know, and doing it well. You can’t argue with a 6 billion dollar market cap. Sunoco clearly believes in this business and The Tank Tiger looks forward to their continued success.
Oil prices finished the week higher as many companies have re-routed their ships away through the Red Sea. Crude prices have reverted to backwardation, indicating that traders believe that supplies are tight. Arctic air has dropped into the Midwest, the South, and the Northeast. Temporary supply disruption and temporary demand flux. This is all only temporary. Don’t question our behavior, trust us. On the equity front, the U.S. labor market remains robust with weekly jobless claims touching on a 16-month low. Equity futures are still more than 50% priced for a first rate cut in March as the S&P 500 secured its first record-high close in two years on top of a 24% gain from last year. Look at your 401k, and smile.
