2 new mlps worth a closer look
DESCRIPTION
Phillips 66 Partners and Valero Energy Partners are less than a year old, but don't let that fool you.TRANSCRIPT
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2 New MLPs That Are Worth a Closer Look
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The Class of 2013
A staggering 20 master limited partnerships went public last year
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The Class of 2013
SCXP CVRR USAC NSLP KNOP EMES TEP PSXP FISH QEPM WPT OCIR OCIP WNRL PAGP SRLP MEP ARCX DLNG VLP
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Big Potential
MLP fund flows continue to increase in 2014, and actively managed funds are going after young MLPs with big potential.
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Big Potential
Some of the most compelling MLPs on the market today debuted last
year. Now that they have a few quarters under their belt, here are
two you don’t want to miss.
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Phillips 66 Partners
• Market debut: 7/13• Common units
outstanding: ~38.7 million
• General partner Phillips 66 controls > 50% of common units
NYSE: PSXP
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Key events
July 23, 2013
Dist. $0.155(Pro-rated)
Dist. $0.225
5/1/14
Gold Line acquisition $700 million
Units close at ~$65, +182%
PSXP prices at $23
10/31/13 1/31/14
2/13/14
Dist. $0.274
Mid-June
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Key statistics
• Total pipeline capacity: 775,000 barrels/day• Total storage capacity: 12.2 million barrels• Total dock throughput: 57,000 barrels/hour
• Adjusted EBITDA up 62% since IPO• Quarterly distribution up 29% since IPO
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Why invest?• 5 different asset systems, including crude oil
pipelines, terminal storage, refined products pipelines, and propylene storage.
• Each asset backed by fee-based agreement with Phillips 66, including minimum volume commitments and inflation escalators
• Parent-company is midstream-focused• Dropdown opportunities aplenty, given PSX’s asset
footprint
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Valero Energy Partners
NYSE: VLP
• Market debut: 12/13• Common units
outstanding: ~28.8 million
• General partner Valero controls < 50% of common units
Photo credit: flickr/Anthony Qunitano
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Key statistics• 3 pipeline systems supporting 3 refineries with
675,000 bpd combined capacity• Generated $13.57 million in distributable cash
flow in Q1 2014• Units are up ~92% from IPO price• Distribution coverage ratio at 1.09 times
distributions in the most recent quarter
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Why invest?• Fee-based contracts with Valero drive revenue• Right of first offer for Valero asset acquisitions,
including six different systems or storage assets• Growth is imminent: Dropdowns are slated to
begin in the third quarter of 2014• Management expects to grow distributions by
about 20% each year for the next three years
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Key takeaways
• Both of these MLPs are small and new, but are driven by fee-based contracts from mature businesses
• Asset footprint growth story is relatively transparent
• Investors can expect distribution growth and adequate coverage for the foreseeable future
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Do You Know This Energy Tax Loophole?