Friday, March 15, 2013

Dakota Plains Holdings, Inc. (DAKP) JV’s Major Rail Capacity, Inbound Logistics, and Storage Upgrade at Williston Facility

Dakota Plains Holdings announced some major news today regarding expansion of their New Town, North Dakota oil transloading facility (current on-site tank car capacity of 160), in conjunction with JV partner and wholly-owned subsidiary of World Fuel Services Corp. (INT), Petroleum Transport Solutions, LLC., as construction of the new Pioneer Project kicks off.

The Pioneer Project is on the company’s sprawling 192-acre New Town site, which will eventually host the planned double loop track (8,300 feet each), containing an interior space of some 90 or more acres for facilities, including a ten-tank car load out building and two 90k bbl storage tanks (with room for more development in future). This greatly extends capacity of the existing facility, which is ideally located in the heart of the Williston Basin, with a majority of incoming oil supply derived primarily from regional Bakken sources. The expansion dovetails with the four existing 2,500-foot tracks and will allow them to be used for inbound oilfield commodities/supplies like sand and equipment.

This expansion will bump-up overall throughput handsomely for crude oil off take services provider DAKP, which will get more traction out of their existing marketing, transloading, and crude oil trucking portfolio thanks to the upgrade. The New Town facility is in its fourth year of successful midstream operations and DAKP has amassed a considerable reputation, as well as a sizeable trucking fleet, and some 1.1k railroad tank cars (directly or indirectly). The global fuel logistics pros at World Fuel Services, which can boast of clients in over 8k locations across 200 countries worldwide, have armed their subsidiary quite well for the task. 2013 is looking like a milestone year for DAKP as a result of this beefed up capacity.

The Pioneer Project will nearly triple overall throughput to 80k bbls/day (up from 30k) and have room for 120 tank cars. Expansion of storage to 270k bbls is in the plans already and the partnership knows full well that with plenty of room on the interior of the loop, additional storage tanks can be rapidly implemented. DAKP will be able to easily scale up reliability and efficiency by turning the existing infrastructure into incoming support, while also obtaining access to gathering systems and short-range pipelines.

Chairman and CEO of DAKP, Craig McKenzie, projected a banner year for the company in 2013, as the new Pioneer Project’s exceptional economics translates directly into bottom-line growth for shareholders. McKenzie also emphasized how the expansion opens up new logistics business for the company and allows DAKP to expand an already attractive services portfolio to operators in this bustling basin.

Taking full advantage of the extant partnership between DAKP, World Fuel Services, and Canadian Pacific, the relevant crude will be transported using Canadian Pacific’s network, a task they were all too happy to help with, according to Exec. VP and Chief Marketing Officer for Canadian Pacific, Jane O’Hagan. In fact, O’Hagan pointed out how it was a great chance for Canadian Pacific to increase crude volume moving through the network and into the market, clearly pleased with how this expansion will help Canadian Pacific realize a more cost effective means of handling inbound commodities for the Bakken as well.

Finalization of the project has been moved up a notch or two and is looking like December of this year, with an estimated sticker price of around $50M to be split by the JV partners equally. As the existing infrastructure is destined primarily for logistical services, like supporting incoming supplies (chemicals, pipe, sand, etc.), the company has lined up debt financing for that part of the operation.

Senior VP of Supply & Trading over at World Fuel, Carlos Cuervo, expressed excitement at the prospect of playing a major role in this expansion and explained that the move will significantly broaden World Fuel’s penetration into the Bakken crude oil marketing space. It looks like DAKP has their strategy for capturing Williston Basin midstream activity down pat, and this JV upgrade will go a long ways towards further cementing the company in the region as a major provider of tansloading, transporting, and marketing of crude oil and crude oil-related products.

For more information on Dakota Plains Holdings, visit www.DakotaPlains.com

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