As of Sept. 1, some 130 master limited partnerships (MLPs) were traded publicly, with the vast majority involved in the production or transportation of fossil fuels.

That number is set to grow by two more in coming weeks based on preliminary Securities and Exchange Commission filings.

And while these omit key numbers like the expected price range and the minimum distribution, the recent record of other MLP debuts suggests these offerings will be in demand.   

USD Partners

USD Partners (USDP) was formed by US Development Group to acquire, develop and operate energy-related rail terminals and other complementary midstream infrastructure assets and businesses. Its initial assets are:

• A ~173,000 barrel per day (bpd) crude-by-rail terminal in Hardisty, Alberta, capable of  load up to two 120-railcar unit trains per day

• A 20,000 bpd ethanol rail terminal in San Antonio, Texas

• A 13,000 bpd ethanol rail terminal in West Colton, California  

In addition to these assets, USDP manages a fleet of 3,799 railcars. The partnership generates nearly all of its operating cash flow by charging fixed fees for handling energy-related products and providing related services, with no direct exposure to fluctuations in commodity prices.

USD Partners projects continued strong growth in crude shipments by rail, and expects to grow via further acquisitions from its sponsor, USD. USD is a developer, builder, operator and manager of energy-related infrastructure and was one of the first companies to develop contemporary rail terminals for energy products. USD has developed, built and operated 14 unit train-capable origination and destination terminals with an aggregate capacity of over 730,000 bpd.

Since 2006, USD has loaded and/or handled through its terminal network a total of more than 75 million barrels (MMbbls) of crude oil and more than 72 MMbbls of ethanol. USD’s expansion projects of interest to USD Partners include the Hardisty Phase II and Hardisty Phase III, which would expand the capacity for handling and transportation of crude oil at Hardisty by two additional 120-railcar unit trains per day.

The IPO is projected to raise $150 million. USD Partners expects the Hardisty terminal to account for 90% of its projected EBITDA of $38.7 million over the next year, with $27.1 million available for distribution to investors.

Cone Midstream Partners

Consol Energy (NYSE: CNX) and joint venture partner Noble Energy (NYSE: NBL) filed paperwork with the SEC for an initial public offering of a Marcellus midstream MLP that will be called Cone Midstream Partners (CNNX). Both sponsors are rapidly growing production in the Marcellus Shale in Pennsylvania and West Virginia, and they intend to use Cone Midstream Partners as their primary midstream services provider there.

Initial assets of the partnership will be contributed by both sponsors and supported by fee-based, 20-year contracts covering 100% of expected revenue. These assets include natural gas gathering pipelines and compression and dehydration facilities, as well as condensate gathering, collection, separation and stabilization facilities.

Initial midstream assets are divided into three separate categories, which are referred to as “Anchor Systems,” “Growth Systems” and “Additional Systems” based on their relative current cash flows, growth profiles, capital expenditure requirements and the timing of their development.

Anchor Systems include midstream systems that generate the substantial majority of current cash flows and that are expected to drive growth over the near term as average throughput on these systems increases from the sponsors’ growing production.

Growth Systems include high-growth, developing gathering systems that will require substantial expansion capital expenditures over the next several years, the substantial majority of which will be funded by the sponsors in proportion to their retained ownership interest.

Additional Systems are smaller, lower-growth gathering systems that are expected to generate stable cash flows and require less capital spending over the next several years.

The IPO is projected to raise up to $350 million. For the 12 months ending Sept 30, 2015 the partnership forecasts EBITDA of $67.4 million, with $58.2 million of distributable cash flow available for investors.

(Follow Robert Rapier on Twitter, LinkedIn, or Facebook.)

Portfolio Update

Buckeye Buys Into Energy Exports    

The IPO of a new partnership isn’t the only avenue for corporate sellers hoping to cash in on their midstream assets. Sales to an existing MLP have also proven popular.

Buckeye Partners (NYSE: BPL) has been especially acquisitive of late. In December it paid $850 million to Hess (NYSE: HES) for 20 petroleum products storage terminals. Last week, Buckeye said it would spend $860 million on an 80% stake of a joint venture with leading global oil trader Trafigura that will acquire Trafigura’s marine terminal in Corpus Christi, Texas, an oil condensate splitter and liquefied petroleum gas (LPG) storage complex in the same city and three crude and condensate gathering facilities in the nearby Eagle Ford shale play.

The assets are backed by 7- to 10-year minimum throughput, storage and tolling guarantees from Trafigura, but will require an additional $240 million to $270 of capital spending by early 2016. Once the buildout is complete, Buckeye’s share of the joint venture’s EBITDA (earnings before interest, taxes, depreciation and amortization) will be expected to recoup its purchase price over 8.5 years. Counting the spending to come, the assets likely carry a price tag closer to 10 times EBITDA, but the partnership said it still expects the deal to boost its distributions per unit after 2016.

The current enthusiasm over oil condensate and LPG export opportunities made the deal palatable to investors who paid $80 per unit to participate in last week’s secondary offering, which raised $540 million toward the Trafigura deal.

While the transaction may prove accretive as the partnership claims after 2016, the offering will be immediately dilutive, diminishing Buckeye’s already suboptimal distribution coverage. Furthermore, as the past quarter showed, the pressure to get the most out of recently acquired assets increases the risk of executive missteps.

For these reasons, we would remain on the sidelines at the current valuation. Buy BPL below $70.       

— Igor Greenwald