Merger Monday lived up to its moniker today as Energy Transfer Partners LP (NYSE: ETP) announced plans to acquire Sunoco Inc. (NYSE: SUN) for $5.3 billion.
Investors cheered the deal, sending shares of both companies higher. Following the announcement, Sunoco stock gushed higher by more than 20%, its biggest gain in more than three years. Energy Transfer Partners rose almost 6%.
The acquisition is just the latest in big-time energy deals fueled by the need for expanding pipeline networks.
The deal gives Energy Partners 7,900 miles of oil pipelines, as well as 4,900 Sunoco branded retail fueling stations in the United States.
Darren Horowitz, an analyst with Raymond James & Associates says the transaction will help Energy Transfer attain its objective of expanding both the geography of the company's pipeline network and the products it ships, adding, "It opens the door for greater growth."
- Sunoco (NYSE: SUN) Deal is All About the Pipeline
- The "Sweet Spot": Goldman Sachs Bullish on Oil and Gas Pipeline Companies
Nothing like having Goldman Sachs (NYSE: GS) confirm what we've already been saying for a year.
But last week, Goldman Sachs reminded us that they are bullish on the oil and gas pipeline sector by upgrading a number of portfolio stocks that have been prominent features of our portfolios and discussion on the sector.
Goldman analysts made headlines last week by adding a number of pipeline firms to their "Conviction Buy" list. The company added Williams Companies (NYSE: WMB) while dropping Buckeye Partners L.P. Nonetheless, Goldman still rates Buckeye as a "Buy."
Goldman also raised a number of additional stocks to the buy list, including Plains All American Pipeline LP (NYSE: PAA), and maintained its "Buy" ratings on Enterprise Products Partners (NYSE: EPD), and Enduro Royalty Trust (NYSE: NDRO), and Magellan Midstream Partners (NYSE: MMP).
The reason for these moves shouldn't be a surprise to anyone who follows us at Oil and Energy Investor.
The Sweet Spot in Oil and Gas Pipeline CompaniesIt's not surprising that Goldman Sachs is so bullish on the pipeline industry. After all, my colleague Dr. Kent Moors has been touting the best known secret on the markets for more than a year.
If you want to make money in energy investing, you want to park yourself right in the middle of the supply chain. By doing so, you're far less susceptible to price fluctuations in the underlying commodity, and you are able to collect easy profits from the growing demand in fuels.
Midstream companies, those that connect the upstream exploration and production companies to the downstream retail, refining and marketing channels, provide vital services in transportation, storage, and processing.
Simply put, this is the "Sweet Spot" of energy investing.