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Why This Midstream Player is Making Waves

More North American energy companies are turning to rail transport as an option to get crude oil to refineries because there isn't enough pipeline infrastructure in place to keep pace with the boom. Though cross-border options like Keystone XL are stuck in bureaucratic limbo, the intra-continent midstream sector is emerging as a good opportunity for energy players keen on nibbling at the margins of the region's oil bonanza.

Genesis Energy (NYSE: GEL) this week said it was looking to take advantage of the best of both worlds by exploring options to link the glut of North American oil to the rail sector. It said it was conducting an open season to see who was interested in a 70-mile pipeline network that would tie a Casper, Wyo., terminal to its existing Pronghorn train loading facility.

Pronghorn is the only facility of its kind in the region that's serviced both by BNSF Railway and Union Pacific Railroad.

Grant Sims, the company's chief executive officer, said the pipeline would offer crude oil shippers a cheaper and more efficient way to deliver their products from the state's Powder River basin, which Genesis says could be a premier and emerging play west of the Mississippi River.

"As Canadian volumes continue to increase over time, along with local production, Pronghorn is best positioned long?term to provide shippers with the flexibility to load trains and facilitate the movement of these barrels directly to the most attractive markets," he said.

Pronghorn can load a train in less than 24 hours.

Wyoming's oil production saw a long period of decline until experiencing a rebound at the beginning of the decade. The Wyoming State Geological Survey said it expects the recent boom cycle in the Powder River basin to continue. Last year, the basin accounted for nearly 48 percent of all of the oil produced in the state and production since 2011 increased at a rate of 15 percent. All told, Powder River produced more than 2.9 billion barrels through the end of 2013.

Powser River Basin Oil and Gas Production

Wyoming is among the top 10 oil producers in the nation and its Powder River basin as at the forefront of an emerging boom. The U.S. Energy Information Administration describes Wyoming, meanwhile, as a "crossroads for pipelines" that bring regional and Canadian crude oil to Midwest refineries. Though far below states like North Dakota and Texas, production in Wyoming has increased 12 percent since 2009, with close to 60 million barrels of oil produced in 2012.

Sentiment on GEL

Genesis is one of the biggest movers in terms of share price in recent weeks and its stock rating has moved closer to "buy." With Wyoming expecting an increase in oil production, Genesis is in a prime position to exploit the boom and its new pipeline could be in service by 2015.




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