Oasis Petroleum Inc. (OAS), SandRidge Energy Inc. (SD) & Three Oil Companies Spending Money to Save Money

Cutting out the middleman
One of the more common money-saving investments an oil and gas company will make is in building out a midstream system to enhance its operations and profits. Lately, though, that trend has been reversed, as we’ve seen a large exodus of these operations, with midstream MLP IPOs a hot commodity. One company that still does have its midstream operations is Devon Energy Corp (NYSE:DVN).

With ownership of 16,000 miles of pipeline and 62 processing plants in both the U.S. and Canada, Devon’s midstream operations are impressive. These operations kick off about $450 million in operating profit and enhance the company’s margins by $2 per barrel of oil equivalent. Devon Energy Corp (NYSE:DVN) has plans to expand the business this year to the tune of a billion dollars because it sees several profitable growth opportunities.

Foolish bottom line
Right now these assets all represent hidden value that’s only realized through current cost savings. However, over time you’ll most likely see the value of these assets unlocked either through a sale or other strategic initiative. Devon Energy Corp (NYSE:DVN) has already announced that it’s looking to turn its midstream operations into an MLP, while SandRidge Energy Inc. (NYSE:SD) has said it that it would like to monetize its saltwater disposal system. The bottom line, though, is that companies with these hidden assets have realized that you really can make, or “save,” money by spending it.

The article 3 Oil Companies Spending Money to Save Money originally appeared on Fool.com is written by Matt DiLallo.

Fool contributor Matt DiLallo owns shares of Heckmann and has short June 2013 $4 puts on Heckmann. The Motley Fool owns shares of Devon Energy and Heckmann and has options on Chesapeake Energy and Heckmann.

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