Wed Jun 04 2014
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Two May IPOs Off to Fast Starts

Last month saw two new master limited partnerships (MLPs) go public. GasLog Partners (NYSE: GLOP) is an offshoot of GasLog (NYSE: GLOG), which is an owner, operator and manager of liquefied natural gas (LNG) carriers. GasLog (GLOG) owns the 2 percent general partner interest, all incentive distribution rights and a 49.8 percent limited partner interest in GLOP.

GLOG completed its IPO in April 2012, and has since more than doubled the total carrying capacity of vessels in its fleet. This increase includes two LNG orders announced in February 2013 and two others announced in August, all of which are to be delivered in 2016. GLOG also acquired one 2010 built LNG carrier in September 2013, three secondhand steam-powered ships from BG Group (OTC: BRGYY) in April 2014, and has three additional secondhand steam-powered ships that are under contract to be purchased from BG Group.

GasLog currently has a fully-owned twenty-one-ship fleet, including fourteen ships on the water, and seven LNG carriers on order from Samsung. GasLog Partners is starting out with three of its parent’s 14 current ships, but with options to purchase 12 more including several currently under construction. GasLog Partners also has a commitment to turn the MLP into the primary owner of its carriers under long-term charters. The three ships are chartered to the BG Group, with the earliest charter expiring in January 2018 (with an option to 2026).

The IPO of GasLog Partners was for 8.4 million common units representing limited partner interests at $ 21 per common unit, above the proposed price range of $ 18 to $ 20. However, demand for units was extremely strong, lifting the price to a close at $ 26.11 on the first day of trading, and above $ 28 today following bullish notes from analysts. Dividing the projected minimum annual distribution of $ 1.50 per unit by a price of $ 28 puts the prospective annualized yield at 5.4 percent.

Two days after the GasLog Partners IPO, PBF Logistics (NYSE: PBFX) made its market debut. Following in the footsteps of other refiners who have dropped down assets into MLPs, PBFX was formed by PBF Energy (NYSE: PBF) to own or lease, operate, develop and acquire crude oil and refined petroleum products terminals, pipelines, storage facilities and similar logistics assets. The partnership supports crude oil logistics for three PBF Energy refineries, located in Toledo, Ohio, Delaware City, Delaware and Paulsboro, New Jersey.

Initial assets consist of a light crude oil rail unloading terminal at the Delaware City refinery that also serves the Paulsboro refinery, and a crude oil truck unloading terminal at the Toledo refinery that facilitates crude oil delivery operations at all three refineries.

PBF Logistics generates revenue by charging fees for handling crude oil, and has no direct exposure to commodity price fluctuations. All revenue will be initially derived from long-term, fee-based commercial agreements with subsidiaries of PBF Energy. The commercial agreements with PBF Energy will include minimum quarterly volume commitments and inflation escalators, and will be for an initial term of seven years.

PBFX will serve as PBF Energy’s primary vehicle to expand the logistics assets supporting its business. PBF Energy will serve as the general partner, and retain a 56.7 percent limited partnership interest in PBFX and all of incentive distribution rights.

PBFX priced its initial public offering of 13.75 million shares at $ 23, above the expected range of $ 19 to $ 21. Like GLOP, units of PBFX were sharply higher on the first day of trading, closing at $ 27.68, but trading mostly lower since.

The prospectus sets the minimum target quarterly distribution at $ 0.300 per unit per quarter, or $ 1.20 per unit on an annualized basis. At last Friday’s close of $ 26.75, units yield 4.5 percent on an annualized basis.

Refiners that have spun off midstream assets have done very well over the past years. Valero Energy Partners (NYSE: VLP) is up nearly 60 percent since its December IPO, Phillips 66 Partners (NYSE: PSXP) has more than doubled since its July IPO (and is the biggest gainer among MLPs year-to-date), and MPLX (NYSE: MPLX) — formed from Marathon Petroleum (NYSE: MPC) — is up 110 percent since its November 2012 IPO.

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