Favourable market dynamics coupled with continuing crude oil price structure volatility is proving a particular bright spot for Arc
Since acquiring its first six terminals in July 2007, Arc Logistics Partners has significantly grown its market presence in North America with a series of acquisitions, the most recent of which was in July which included a newly constructed terminal in Colorado.
International and regional market dynamics are shifting the oil and gas infrastructure business and Arc Logistics Partners has its sights firmly set on expanding its market presence as well as supporting the expansion plans of new and existing customers. To that end, Arc Logistics Partners’ customer-centric business model has driven the company’s acquisition strategy despite the current market dynamics.
In an interview with Tank Storage Magazine, John Blanchard, President of Arc Terminals, says that the business will continue to capitalise on growth opportunities and changing market dynamics.
‘Increasing North American crude oil production and new logistical requirements to move this production can generally have a favourable impact on our results but the market dynamic is location and product specific.
‘As we do not own any of the crude oil and petroleum products that we handle and do not engage in the marketing of crude oil and petroleum products, we have minimal direct exposure to risks associated with fluctuating commodity prices.
‘We have acquired and upgraded our assets in response to increased customer demand for long term storage and throughput services. ‘Our ongoing business strategy is to expand our market position and support the expansion plans of new and existing customers,
while generating stable cash flows for our unitholders from quality assets supported by long-term contracts.’
All 17 terminals, which are primarily located in the East Coast and Gulf Coast with other locations including the midwest and west coast, are strategically connected to major US pipeline infrastructure and/or additionally are linked to crucial rail and marine access points.
The recent acquisition of UET Midstream’s assets, which includes a newly built terminal in Colorado (the ‘Pawnee Terminal’) and
permitted land for the development of a new terminal (the ‘Buckingham Terminal’), has enhanced its market position within one of the fastest growing production areas of the US.
It provides customers direct pipeline access to Cushing, Oklahoma, via the North East Colorado Lateral of the Pony Express Pipeline.
Demand for crude oil into Cushing, Oklahoma remains strong despite volatile crude oil prices and Arc expects that the newly acquired Pawnee Terminal will continue to remain a long-term consolidation and injection point for these barrels.
‘The multi-modal crude oil terminal provides support for the partnership’s crude oil strategy and also expands the partnership’s operating footprint into the Denver Julesburg Basin,’ says Blanchard.
The recently completed acquisition was purchased by Arc Logistic Partners with the intent to increase capacity and expand capabilities and access for both new and existing customers.
LOCAL MARKET DYNAMICS
As with all storage terminal operators, short-term and long term demand for, and supply of, crude oil and petroleum products plays a key role in the operation of the assets.
Other factors include the indirect impact that crude oil and petroleum product pricing has on the demand and supply of logistics assets, such as storage as well as current and future economic conditions both regionally and globally.
‘Our ability, and the ability of our competitors to capitalise on growth opportunities and changing market dynamics is another factor that impacts the local market,’ adds Blanchard.
‘Law and regulations affecting our business frequently change and evolve, creating a variety of challenges for any terminal operator.
‘We strive to be proactive in our response to the changing regulatory environment to capitalize on these opportunities.’