2 New MLPs That Are Worth a Closer Look
The Class of 2013
A staggering 20 master limited partnerships went public last year
The Class of 2013
SCXP CVRR USAC NSLP KNOP EMES TEP PSXP FISH QEPM WPT OCIR OCIP WNRL PAGP SRLP MEP ARCX DLNG VLP
Big Potential
MLP fund flows continue to increase in 2014, and actively managed funds are going after young MLPs with big potential.
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.
Phillips 66 Partners
• Market debut: 7/13• Common units
outstanding: ~38.7 million
• General partner Phillips 66 controls > 50% of common units
NYSE: PSXP
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
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
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
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
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
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
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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