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Permalink Reply by cocodrie man on February 10, 2014 at 2:07

Joe, Is this the pipeline just completed along the east side of U.S. Hwy 61 south of Zachary?  I have taken notice of the new tanks under construction at the tank farm north of Baton Rouge.  These are exciting developments.

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Permalink Reply by Joe Aldridge on February 10, 2014 at 3:32

Jay,

That is not what we are hearing locally. If you would please provide some information that would clear this up I would appreciate it. Your cryptic posts leave much to be desired at times.

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Permalink Reply by Joe Aldridge on February 10, 2014 at 4:18

Jay,

What seems to be lost here is that Genesis already has a pipeline from the Marathon Tank facility to the dock at Port Hudson. That River Dock was built by AMOCO to load crude from the TUSC and transport it to a refinery in Indiana. When BP bought Amoco they continued to use that facility for that purpose. Where are they going to get the amount of crude to supply a pipeline capable of transporting 350,000 bbls of crude per day? Why are they getting ready to build a line from the Marathon facility North into the TMS. Why are they building a rail unloading facility at Maryland Tank Farm to unload rail cars? Where is that crude coming from? Would love to have your insight here.

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Permalink Reply by jim weyland on February 10, 2014 at 8:08

jay, you're spot on. they line up long term transport agreements, then they lay pipe. jim

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Permalink Reply by Joe Aldridge on February 10, 2014 at 9:45

Jay and Jim,

I have followed Exxon for years. They think years ahead on anything they do. So it would not surprise me for them to be laying the infrastructure to move crude from the TMS. If you look at the Bakken and EagleFord they are still flaring gas in those fields because they have no infrastructure to move the NG produced. That is a pure waste because no one was looking ahead.

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Permalink Reply by jim weyland on February 10, 2014 at 11:34

joe, i went and read the various news releases and press accounts of the genesis project. they're funding the project by drawing down their credit revolver.

and, to me, it appears that xom's only skin in the game is in granting genesis the right to build the maryland unit train tank car facility. where, imo, the crude would be coming from canada and or the bakken. 

genesis' market cap is just over $4B. the 18 mile 20" project has an estimated cost of $125 M. if they don't have long term transportation commitments, then they've got bankers with more, uh, let's say, spine than any than i've ever seen.

jim

Permalink Reply by Joe Aldridge on February 10, 2014 at 13:04

Jim,

If this is simply to bring Bakken or Canadian oil in why would Exxon have Genesis build an 18 mile 120 million dollar pipeline when the refinery already has dock space available? What you are not seeing is the 3 mile connection to the Marathon Tank Farm that Genesis already has to the Pennington dock. That extends this 20" pipeline into the TMS. They have added several tanks to that facility just recently in conjunction with the laying of the pipeline. Someone is adding a bulk Propane facility at this time (4 very large propane vessels) across Hwy 61 from the Marathon Tank Farm. Is this propane facility going to be used to store propane that is separated from the NG produced in the TMS? The NG is said to be high in NG Liquids.

This still leaves the question of why build a 60 mile pipeline into the TMS to pick up Bakken and Canadian oil? 

What you may not be seeing in your financial analysis is a letter agreement between Exxon and Genesis that backs the venture and at this time is confidential. I think any banker would be interested in jumping at a loan backed by Exxon. 

Permalink Reply by Joe Aldridge on February 10, 2014 at 3:18

Cocodrie man,

Yes, that is the lower half of the pipeline. There is another line that is going to start in the near future at the Marathon Tank Farm and go North 60 miles into the TMS. Don't know the start date or the route yet. 

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Permalink Reply by jim weyland on February 12, 2014 at 10:20

per today's wsj, the genesis energy 7.875% notes of Dec 15 of '18 were creamed yesterday closing down 6.13%. imo, that's not a market vote of confidence.

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Permalink Reply by Spring Branch,mineral owner on February 14, 2014 at 5:10

Jim, do the notes trade every day?

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Permalink Reply by jim weyland on February 14, 2014 at 5:38

it's my understanding that the credit markets operate mon-fri.

with very "liquid" instruments such as us govt debt, one can find someone to take the other side of the deal pretty much all of the time because of the breadth and depth of the market.

on the other hand, with somewhat illiquid notes like my guess that the genesis note is, you might not be able to find someone to take the other side of the deal at all times w/o your having to take a haircut. 

note: i've never traded in the debt markets, so, take my thoughts, above, as just that.

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Permalink Reply by Spring Branch,mineral owner on February 14, 2014 at 5:57

Jim, If the notes had not traded in some time, the price may have changed gradually over that time period through a change in the Bid/Ask. The last sale price would not change until it actually traded and it would at that point reflect a large daily gain or loss.  Could possibly have more to do with interest rates than a "vote of confidence".  It is not uncommon for illiquid notes such as these to have fairly large price movements.

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