In a research note published on October 11, the analyst mentions that as a substantial advantage for the company, remark on the open-season filing by SemGroup Corporation (NYSE: SEMG) so to tot up capacity in the region was formerly given.
At the present moment, in order to add 80,000 barrels per day to the current 70,000 at a price of approximately $300 million (SEMG has 51 percent) and an in use date of middle of 2014, the new line is looked for, even though more specific aspects will be recognized on the subject of the White Cliffs development when the open-season gets completed on October 22, 2012.
Besides, target price for SemGroup Corporation has been reiterated at $46 and this is done on the basis of SOTP analysis. Furthermore, latest lift of target price (Sept 24, 2012) derived from the current value of the new 80,000 bpd pipeline that is anticipated to go into service in the year 2014 is continuously been supported by the valuation.
In addition to this, price for Rose Rock Midstream LP (NYSE: RRMS) has been reiterated at $36 and this is done on the basis of three-stage dividend discount model. As the new line construction improves, SemGroup Corporation is supposed to drop down 33 percent to 50 percent of White Cliffs to Rose Rock Midstream and due to this, the valuation also carries on supporting the latest increase of target price.
Furthermore, costs of commodity and the confidence on producers to keep on drilling and generating oil and gas stay as major risks for SemGroup Corporation and this is said on the basis of a fundamental point of view.
Moreover, the situation of market related with the marketing operations is viewed as optimistic for Rose Rock Midstream LP, however a significant price risk and basis risk is connected with it. The margins can be pulled down by any change in the situation of market, the analyst adds further.
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