NuStar (NS -7.3%) CEO Bradley Barron expects the $1.475B purchase of Permian Basin midstream operator Navigator Energy Services, when coupled with “modest” spending to build out the system, will result in a high single-digit multiple as volumes ramp up over time.
But sentiments among some oil analysts indicate the price NS paid for the assets was “robust” at more than 20x this year’s expected EBITDA and probably 15x-plus for 2018 and 10x-plus for 2019.
Even though NS already own assets in south Texas’ Eagle Ford shale, Tudor Pickering says there is limited portfolio overlap, which may inhibit commercial synergies given that NS’s backlog is weighed to storage and terminals.
Tudor Pickering also notes the NS deal makes the Medallion pipeline look more valuable, which could lead owner Laredo Petroleum (LPI -0.9%) to sell down its stake in the system, unlocking significant value for LPI shareholders.
Now read: Is Laredo Petroleum A Buy Here? »