One new MLP IPO is scheduled to list this week, while several others have filed initial paperwork with the Securities and Exchange Commission (SEC). JP Energy Partners (which will trade as JPEP) was formed in May 2010 by ArcLight to own, operate, develop and acquire midstream energy assets. The partnership is an MLP focused on the gathering, storage and movement of crude oil, refined products and natural gas liquids from production centers in the southwest and midcontinent regions of the United States.

JP Energy Partners operations consist of four business segments:

• Crude oil pipelines and storage

• Crude oil supply and logistics

• Refined products terminals and storage

• Natural gas liquids (NGL) distribution and sales

The crude oil pipelines and storage segment consists of an intrastate crude oil pipeline system in the Permian Basin (the Silver Dollar Pipeline System) and a crude oil storage facility in Cushing, Oklahoma. The Silver Dollar Pipeline System provides crude oil gathering services for producers in the Southern Wolfcamp play in the Midland Basin under long-term, fee-based contracts. The system consists of 50 miles of pipeline with capacity of approximately 100,000 barrels per day (bpd) and an interconnection to a third-party long-haul transportation pipeline.

The crude oil supply and logistics segment manages the movement of crude oil mostly through a network of owned and leased assets. Its assets and operations are located in crude oil production growth areas like the Permian Basin and Eagle Ford shale. The partnership owns and operates a fleet of crude oil gathering and transportation trucks and oil truck injection stations and terminals. This segment leases crude oil storage tanks in Cushing.

The refined products terminals and storage segment has aggregate storage capacity of 1.3 million barrels at two refined products terminals located in North Little Rock, Arkansas and Caddo Mills, Texas. The North Little Rock terminal has storage capacity of 550,000 barrels and is primarily supplied by a refined products pipeline operated by Enterprise TE Products Pipeline Company. The Caddo Mills terminal has storage capacity of 770,000 barrels and is primarily supplied by the Explorer Pipeline. This business segment generates fee-based revenues, as well as revenue from blending activities (e.g., ethanol blending and butane blending) and from vapor recovery units.

The NGL distribution and sales segment consists of the third-largest propane cylinder exchange business in the United States, NGL sales, and NGL transportation. The NGL sales business involves the retail, commercial and wholesale sale of NGLs and other refined products. The NGL transportation business gathers and transports NGLs for producers, gas processing plants, refiners and fractionators located in the Eagle Ford shale and Permian Basin.

For the 12 months ending Sept. 30, 2015 the partnership estimates distributable cash flow will be approximately $56.8 million. The sum of the minimum quarterly distributions is $47.4 million, giving a projected coverage for the 12-month period of 1.2x and a minimum annual yield of 6.5%. Units are expected to begin trading this week at an expected range of $19 to $21.

In addition to JP Energy Partners, several other partnerships filed paperwork with the SEC last week. PES Logistics Partners (PESL), which is controlled by Carlyle Group and gasoline retailer Sunoco, filed for an IPO with a funding goal of $250 million. All revenue and cash flow will be initially derived from an equity ownership in North Yard Logistics, which will own and operate a 140,000 bpd rail unloading terminal at the parent company’s Philadelphia refinery complex and a pipeline connection to accept deliveries of crude oil from a nearby third-party terminal.

Hess (NYSE: HES) will spin off some of its midstream assets with an IPO for Hess Midstream Partners (will trade as HESM). The partnership’s initial assets are primarily located in the Bakken and Three Forks shale plays in the Williston Basin of North Dakota and include interests in a natural-gas processing plant, a rail-loading terminal and a crude oil truck and pipeline terminal.

Antwerp-based EXMAR, an independent LNG and LPG carrier owner and operator, filed with the SEC to spin off some of its assets into EXMAR Energy Partners LP (which will trade as XMLP). Exmar Energy Partners will initially own a 50% joint venture interest in four liquefied natural gas regasification vessels and one LNG carrier. The IPO seeks to raise $125 million, and the partnership — like most marine shipping partnerships that are organized and headquartered outside the US — has elected to be taxed as a corporation for US federal income tax purposes.

Finally, Oklahoma-based Mammoth Energy Partners (plans to trade as TUSK) filed paperwork for an IPO of up to $100 million for an oilfield services partnership. The partnership is affiliated with Gulfport Energy (NASDAQ: GPOR) and is sponsored by Wexford Capital. Wexford owns Mammoth Energy Partners’ general partner, Mammoth Energy Partners GP. Wexford and Gulfport will contribute seven affiliated companies to the partnership. These companies provide completion and production services, contract drilling, and remote accommodation services. The partnership will own 52 hydraulic fracturing units in the Utica Shale and 14 land drilling rigs in the Permian Basin.

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

Portfolio Updates

ETP Rises to the Top   

It’s not exactly a surprise that Energy Transfer Partners (NYSE: ETP) is finally doing better. Its improving cash flow and the potential for increased distribution growth were evident when we upgraded it from Hold to a Buy in November, increased the buy limit in May and called it a Best Buy in July.

What is a mild surprise is that the market has finally woken to the transformation. On Monday, ETP’s unit price rose 3.2% to a new record high. It is the second best-performing MLP for the month of September with a gain of 9.6% through Monday, while the Alerian MLP Index was losing 2%.

The recent strength has been accompanied by heavy call buying, especially of the December, January and March calls with modestly out-of-the-money strikes.

Last month’s Kinder Morgan (NYSE: KMI) offer to  buy out Kinder Morgan Energy Partners (NYSE: KMP) is very likely fueling some of this excitement because, like KMP, ETP is large, relatively high-yielding and slowed by an incentives scheme entitling its general partner to a rising share of its profits.

Late last week, in a note reprised on Seeking Alpha Monday, Morningstar’s Jason Stevens director of energy equity research, Jason Stevens, singled out Energy Transfer Partners’ general partner, Energy Transfer Equity (NYSE: ETE), as the GP likeliest to follow Kinder’s lead. ETP’s growth is actually accelerating rather than slowing as was the case at KMP. Still, even after the recent rally its yield of 6.1% is far more generous than ETE’s 2.5%. An all-equity merger would save ETE quite a lot of distribution money that it could funnel into new projects and acquisitions. And because ETE is itself a master limited partnership, ETP’s unitholders would not be subject to the same unpleasant tax consequences faced by the most loyal investors in KMP, because an all-equity merger between MLPs wouldn’t trigger deferred taxes.

But we’re getting ahead of ourselves, and there are more obvious reasons to like ETP here. In our case, they’re enough to promote the partnership, until now the #7 Best Buy, all the way to the top of the list, and to raise the buy below limit to $70.  

Start with the 6 percent yield, which still looks quite rich for a partnership that’s now growing its distribution at an annualized rate of more than 8%, with solid coverage and continental scale. And while ETP has its own demanding GP, it is itself a general partner to fast-growing Sunoco Logistics (NYSE: SXL) and now, following the closing of the acquisition, to Susser Petroleum Partners (NYSE: SUSP).

SUSP, soon to be renamed Sunoco, has already agreed to the first of numerous likely dropdowns from ETP, paying $768 million, including $556 million cash, for a portfolio of mid-Atlantic filling stations and convenience stores. ETP retains a network of more than 5,000 Sunoco stations, along with its GP interest in SUSP and SXL and the 50% of SXL incentive distribution rights it hasn’t yet sold to its own parent.

Further dropdowns into Susser/Sunoco and the eventual sale of its remaining SXL incentives to ETE provide one avenue for distribution growth. New crude and natural gas transportation routes are also in the offing, ETP is likely to see the benefits of these within two years.

In June, ETP’s board approved a new 1,100 mile pipeline transporting  Bakken crude to the Midwest, where it will link to a converted ETP gas pipeline for transit to the Gulf Coast. The new Dakota Access Pipeline’s initial capacity of 320,000 bpd has already been fully subscribed, and Energy Transfer is already marketing additional capacity that would take the throughput above 450,000 bpd and possibly to as high as 570,000 bpd. The $5 billion pipeline is expected to enter service by the end of 2016.

By about that time ETP also hopes to have completed the first stage of another major project recently greenlighted by its board, the $4 billion Rover Pipeline shipping Marcellus and Utica natural gas to western Ohio and ultimately to trading hubs to the west, north and south.

These projects are not providing any growth yet, and neither is the big Lake Charles LNG export project that ETE has already successfully marketed, and for which ETP would be the principal shipper of natural gas.

As far as the market is concerned, ETP is still a modest grower that wasn’t growing its payouts at all as recently as last year, and which has badly lagged the MLP sector’s gains. As recently as April, ETP’s unit price was no higher than it had been in early 2011.

But this is a much stronger partnership now than it was then or even last year, with a strong slate of growth drivers, valuable assets and a yield many crave.     

— Igor Greenwald