Calgary-based Secure Energy Services has acquired assets in one of the largest crude oil storage and trading hubs in North America.
For a total purchase price of US$10.4 million, the company has acquired a 27 percent interest in a four-tank crude oil storage facility, and a 51 percent interest in an 80-acre parcel of adjacent undeveloped land.
Cushing is the heart of oil processing in the U.S. Midwest, and the largest import point for Canadian crude.
The facility Secure bought into was constructed in 2015 and is strategically located on 10 acres of land in South Cushing with long-term connection agreements in place, noted GMP FirstEnergy analyst Ian Gillies.
“It is our understanding that there are three inbound pipeline connections and multiple outbound connections,” he wrote in a research note on Tuesday.
“This transaction is of significant strategic importance as the company will now be able to provide customers with market access flexibility to optimize pricing and increase netbacks…The overall capital cost is not large and provides Secure with a presence in a key U.S. crude market.”
Currently, the acquired Cushing storage assets include four 175,000-barrel tanks spread over 10 acres, Gillies wrote.
“Extrapolating a similar amount of storage would indicate that Secure could add 20 tanks over the adjacent 50 acres of undeveloped land, which equates to 3.5 million barrels of storage. Management indicated that the site could handle up to 5.0 million barrels of storage. This magnitude of build out is unlikely to occur over the near term, but some amount of additional storage could be sanctioned within 12 months.”