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Strategies & Market Trends : Value Investing

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To: Ditchdigger who wrote (49035)12/7/2012 11:02:10 AM
From: E_K_S  Read Replies (1) of 78520
 
COLUMN-Rail M&A suggests U.S. crude glut won't ease soon:
goo.gl
From the article:".
.. NEW YORK, Dec 6 (Reuters) - The value of terminals forloading crude oil onto trains is rising in the United States, asign that big players are betting inland oil prices will remainlower than previously thought. Closely-held U.S. Development Group announced on Wednesdayit would sell five of its terminals to pipeline giant Plains AllAmerican Pipeline LP for $500 million. The five terminals have a combined capacity to handleapproximately 225,000 barrels per day of crude, putting thepurchase cost at over $2,200 per bpd of capacity. This is significant as the cost of building new railterminals has generally run between $1000 and $1500 per bpd ofcapacity, based on publicly disclosed costs at other projects. The transaction doubtless represents a nice profit for U.S.Development, which only got into the crude by rail business in2010. Perhaps this foray into rail is an uncharacteristicmulti-million dollar blunder by Plains All American, regarded asa savvy operator with a long track record of well-executedacquisitions. A more likely explanation is that Plains has made astrategic move to capitalize on long-term weak North Americaninland oil pricing. But why pay so much more than it might cost to build newterminals? It may be that Plains saw more value in buying theassets now rather than building new sites, despite the fact thatnew terminals can be built very quickly...."
Wow, they paid twice the cost of building new.

EKS
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