By any measure, last week’s initial public offering of shares in Phillips 66 Partners (NYSE: PSXP) was a rousing success.

The master limited partnership, the midstream logistics arm of the refiner Phillips 66 (NYSE: PSX) had aimed to sell 15 million shares at an indicated range of $19 to $21.

But strong investor demand left the offering “multiple times oversubscribed,” according to IPO Boutique, and the deal was upsized to 16.4 million shares and marked up to $23 a pop.

And even so, investors who managed to get allocated some shares before the start of public trading got what proved to be a sweetheart deal. Shares opened just shy of $29 and closed at  nearly $30. At yesterday’s open, they changed hands at nearly $36 before someone found some caution blowing in the wind. Today, the price is once again below $32, leaving investors who participated in the offering with a one-week windfall of 38 percent, while those who bought in at the outset of public trading at $29 have seen their return trimmed to merely 10 percent.

Investors’ enthusiasm is certainly understandable, if not justifiable. The refining industry has been one of the stock market’s strongest sectors over the last year, and Phillips 66, spun off last year from the oil giant ConocoPhillips (NYSE: COP), has been a particularly bright star in this constellation. Its share price had more than doubled in nine months by the time it topped out at the end of March.

And though PSX shares have since slid 16 percent, the company retains a strong midstream business specializing in natural gas liquids transportation, gathering and processing, as well as a stake in a chemicals joint venture with Chevron (NYSE: CVX). Such vertical integration figures to make Phillips 66 one of the leading players in the coming US petrochemical exports boom, fed by cheap domestic natural gas.

The refining and logistics MLPs that preceded Phillips 66 Partners have also done well. Marathon Petroleum (NYSE: MPC) offshoot MPLX LP (NYSE: MPLX) came on the market last Halloween at $22 and got above $39 before retreating to the current $36.

The premise is simple. With North American oil and gas production growing rapidly as shale gets fracked, there’s plenty of profit in moving this hydrocarbon bounty downstream and processing it into exportable fuel. Refining logistics MLPs have this built-in growth driver, while dodging a lot of the commodity price risk shouldered by the parent refiners.

The trouble is that this story is sufficiently popular to have driven up MLP unit prices and driven down their yields to levels that no longer offer much of a margin of safety. MPLX now yields 3.1 percent, while PSXP is down to 2.7 percent based on the minimum distribution specified in the IPO prospectus. This is not much more than the 10-year Treasury offers on principal vulnerable only to the risk of (so far minimal) inflation.

Sure PSXP has potential for some heady growth, including the possibility of acquiring its parent’s stake in lucrative pipelines. But it also faces very real business risks in an industry historically prone to booms and busts. And while it has little direct commodity exposure, it depends heavily on the custom and health of a heavily exposed parent.

Yields on refinery logistics MLPs are now far below those on the biggest and most diversified midstream operators like Enterprise Products Partners (NYSE: EPD) and Kinder Morgan Energy Partners (NYSE: KMP), which are much safer and less exposed to margin volatility. Investors are clearly counting on faster distribution growth, and in the short-term the refiners will be happy to oblige by dropping down more assets.

Limited partners content with such minimal yields will almost certainly not quibble over the transaction price, and the refiners will be happy to raise capital so cheaply. I expect sellers to take long-term advantage of the buyers in these transactions, simply because sellers will be the ones calling the tune, naming the price and fulfilling their fiduciary duty to their own shareholders.

And let’s not even compare the complacency of investors in refining MLPs with the panic attack afflicting the mortgage REITs. I recently wrote a story about that beaten down corner of the income universe, and can attest that the 15 percent yields common for mortgage REITs come with serious interest-rate risk. Whereas at 3 percent the refining MLPs are pricing in nothing but blue skies and limitless growth vistas, it would seem.

My colleague Jason Burack will have a more in-depth look at this group in the forthcoming issue of MLP Profits. It would be foolish to ignore a market niche that has performed so well and does have promising growth opportunities. But it would be equally foolish to neglect the obvious risks, especially when others seem so unconcerned.

Portfolio Update

No Holding Back Alliance

We added Alliance Holdings GP LP (Nasdaq: AHGP) to the Aggressive Portfolio earlier this month as a play on a coal mining rebound, one that happens to be already strongly profitable and impressively unleveraged. And while the unit price has made only modest headway since, Friday’s report by the partnership AHGP manages, Alliance Resource Partners LP (Nasdaq: ARLP) did nothing to shake unitholders’ conviction.

ARLP grew EBITDA by 14.7 percent on a 4.5 percent revenue gain, as a 13.3 percent volume increase offset the 6.8 percent decline in coal prices, year-over-year. The volume gains cut costs per ton nearly 12 percent year-over-year and 1.5 percent sequentially.

The partnership raised annual estimates for production and revenue modestly, and the low end of its net income guidance by 25 percent.

And that’s performance in a still decidedly weak market for coal. “In the near term, we continue to believe that US supply/demand picture will continue to slowly improve, but tepid power demand and a weak outlook for exports will dampen the potential for meaningful price recovery through the end of 2013,” CEO Joseph Craft said on the earnings conference call.

Alliance’s future as a low-cost, low-leverage producer looks considerably brighter than that. ARLP increased its distribution 8.5 percent year-over-year and 2 percent sequentially, while AHGP lifted its payout 12.5 percent year-over-year and 3 percent sequentially. At the new distribution rate, AHGP still yields 5 percent despite a double-digit growth rate. It remains an Aggressive Portfolio Best Buy below $68.