Oil-by-rail pioneer U.S. Development Group cashing up, not out

Tue Aug 20, 2013 12:07am EDT
 
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By Jonathan Leff

NEW YORK (Reuters) - After a major $500 million deal late last year, Texas-based oil-by-rail pioneer Dan Borgen might be forgiven for packing it in.

The sale of five crude oil terminals to Plains All American Pipeline was a landmark for U.S. Development Group, the Pasadena, Texas-company Borgen helped found two decades ago, initially to invest in the rail industry. It came just months before a dramatic collapse in the spread between U.S. inland crude and global benchmarks this year, a shift that has slowed the burgeoning trend of shipping oil by rail.

Not so fast, says Borgen, 52, who along with a team of 40 core USD employees has helped introduce the energy markets to specialized terminals that can quickly load mile-long oil tank trains heading to the same destination - facilities that have revolutionized the U.S. oil market.

Instead, USD is shifting its attention away from the best-known U.S. shale oil plays toward Canada, announcing plans two weeks ago to help build what might be the biggest oil-by-rail terminal to serve the northern oil sands patch.

And although USD has now sold off 10 of the 14 terminals it built over the past decade or so, it has several other irons in the fire such as an offloading terminal in Washington state, inland facilities in Ohio or Alabama and possibly a Texas coast terminal.

"People have asked whether USD is finished after the deal with Plains," Borgen told Reuters in an interview. "We're by no means done."

While a host of other companies have rushed into the business of shipping crude oil by rail, including rail operators such as Warren Buffett's BNSF Railway CoBNISF.UL and refiner Tesoro Corp (TSO.N: Quote), USD has a reputation for being a leader of the pack.

"We are on a growth trajectory and continue to expand," says Borgen, who declined to provide any profit or revenue figures.   Continued...