New Partnerships on the Block
Phillips 66 Partners (NYSE: PSXP) launched on July 23 as one of the most anticipated IPOs this year. PSXP owns some of the midstream logistics assets of its sponsor, Phillips 66 (NYSE: PSX). PSXP has yet to announce its first distribution, but according to the IPO prospectus the minimum yield will be $0.85 per unit on an annualized basis. At the current unit price, this equates to a minimum annual yield of 2.8 percent, which is mainly a function of the huge run-up in unit price between the IPO pricing and today’s unit price. If the distribution does come in near the minimum, the unit price will almost certainly correct downward following the announcement.
Marlin Midstream Partners (Nasdaq: FISH) launched on July 26. The partnership provides natural gas gathering, transportation, treating and processing services, NGL transportation services and crude oil transloading services. Marlin’s assets include three natural gas processing facilities in Texas, two natural gas gathering systems, two NGL transportation pipelines, and two crude oil transloading facilities. Marlin expects most of the gross margin to be generated under fee-based, minimum volume commercial agreements.
Marlin targets a coverage ratio of 1.10x to support distributions. Marlin’s partnership agreement provides for a minimum quarterly distribution of $0.35 per unit for each whole quarter, or $1.40 per unit on an annualized basis. The prorated distribution for the two months of the recently concluded quarter since tje IPO should be announced soon. The minimum annual yield based on the current unit price is projected at 7.7 percent. The unit price has declined 6 percent since the IPO.
World Point Terminals (NYSE: WPT) owns and operates terminals and other assets for the storage of light refined products, heavy refined products and crude oil. World Point’s storage terminals are located in the East Coast, Gulf Coast and Midwest regions of the US. The partnership debuted on Aug. 9, and units have gained 2 percent since. The partnership agreement provides for a minimum quarterly distribution of $1.20 per unit on an annualized basis. At the recent closing price of $19.64/unit, this equates to a minimum annualized yield of 6.1 percent.
OCI Resources (NYSE: OCIR) is a subsidiary of Atlanta-based OCI Chemical, which operates the trona ore mining and soda ash production business of one of the largest and lowest cost natural soda ash producers in the world. The partnership debuted on Sept. 13 and had the worst opening day of any MLP IPO since 2010. On the first day of trading, units closed down more than 5 percent. They have since recovered, and now trade 6 percent above the IPO price. Beginning with the quarter ending Dec. 31, 2013, OCIR intends to distribute at least the minimum quarterly distribution of $0.5000 per unit, or $2 on an annualized basis. At the recent unit closing price of $19.91, this corresponds to a prospective annual yield of 10 percent.
OCI Partners (Nasdaq: OCIP) owns and operates OCI Beaumont, an integrated methanol and ammonia production facility on the Texas Gulf Coast. OCI Beaumont has a methanol production capacity of 730,000 metric tons (MT) per year and an ammonia production capacity of 265,000 MT per year. The facility is in the middle of a debottlenecking project that will increase its annual methanol production capacity by 25 percent and its annual ammonia production capacity by 15 percent.
OCIP debuted on Oct. 4. The IPO priced at $18, below expectations, but has since traded as high as $19.91. OCIP will not have a minimum quarterly distribution. The quarterly distribution will be dependent on the performance of the methanol and ammonia business, which can be volatile. Based on the partnership’s initial cash distribution policy, the distribution would have been $1.744 per unit for the twelve months ended June 30, 2013, corresponding to an annual yield of 8.9 percent at the recent closing price of $19.54.
Western Refining Logistics (NYSE: WNRL) debuted on Oct. 10. The partnership was formed by Western Refining (NYSE: WNR) to own, operate, develop and acquire terminals, storage tanks, pipelines, and other logistics assets. WNRL’s assets include 300 miles of crude oil pipelines, gathering systems, and 566,000 barrels of crude oil storage located primarily in the Permian Basin. Most of its revenue is expected to be derived from two 10-year, fee-based agreements with Western Refining.
As with the refining logistics MLP discussed earlier, PSXP, demand for WNRL units was strong. The initial offering was to be 12.5 million units in the $19 to $21 range, but was upsized to 13.75 million units at $22. Units soared above $24 on the first day of trading. The partnership agreement provides for a minimum annual distribution of $1.15 per unit, corresponding to a yield of 4.7 percent at the recent closing price of $24.30.