IPO Report: Marlin Midstream Partners, LP (FISH)

Francis Gaskins |

Based in Houston, TX,  Marlin Midstream Partners, LP ($FISH) scheduled a $126 million IPO with a market capitalization of $358 million at a price range mid-point of $20, for Friday, July 26, 2013.

Ten other IPOs were scheduled for the week of July 22. The full IPO calendar can be found at IPOpremium.

S-1 filed July 18, 2013

Manager, Joint Managers:  Stifel; Baird; Oppenheimer
Co Managers:  Janney Montgomery Scott; Wunderlich Securities; SOCIETE GENERALE; Ladenburg Thalmann; Stephens; Drexel Hamilton; Natixis; Rabo Securities; RB International Markets (USA).

Summary

FISH is a recently formed midstream energy asset L.P., forecasting a 7% ‘expected’ yield at the price range mid-point of $20, for the 12 months ending June, 2014.

However, to achieve that dividend FISH needs distributable cash flow to increase by 300% from $8.4 million to $27.9 million, respectively from the 12 months ended March ’13 to the 12 months ending June ’14.

From any viewpoint, a 300% increase in distributable cash flow in 15 months seems very aggressive and that’s the risk.

Valuation

Valuation Ratios

IPO Mrkt

Price /

Price /

% offered

 

 

 

Cap (mm)

BkVlue

TanBValue

in IPO

 

 

Marlin Midstream Partners, LP (FISH)

$358

2.5

2.5

35%

 

 

 

 

 

 

 

 

 

COMPARE

Mrkt

Price /

Price /

Dividend

 

 

 

Cap (mm)

BkVlue

TanBValue

Yield, projcted for FISH

 

 

Marlin Midstream Partners, LP (FISH)

$358

2.5

2.5

7.00%

 

 

Crosstex Energy, L.P. (XTEX)

$1,920

1.6

3.2

6.03%

 

 

Rose Rock Midstream, LP (RRMS)

$606

2.7

2.7

4.76%

 

 

Glossary

Conclusion

Assuming investors believe FISH’s forecast, then FISH is a buy on the IPO.  In this particular market environment it seems likely investors will believe FISH’s forecast, at least for the time being.

Business

FISH is a fee-based, growth-oriented Delaware limited partnership recently formed by NuDevco to develop, own, operate and acquire midstream energy assets. FISH currently provides natural gas gathering, transportation, treating and processing services and NGL transportation services, which it refers to as its midstream natural gas business, and crude oil transloading services, which FISH refers to as the crude oil logistics business.

Mid-stream natural gas assets

Primary midstream natural gas assets currently consist of (i) two related natural gas processing facilities located in Panola County, Texas, (ii) a natural gas processing facility located in Tyler County, Texas, (iii) two natural gas gathering systems connected to the Panola County processing facilities, and (iv) two NGL transportation pipelines that connect the Panola County and Tyler County processing facilities to third party NGL pipelines.

Primary midstream natural gas assets are located in long-lived oil and natural gas producing regions in East Texas and gather and process NGL-rich natural gas streams associated with production primarily from the Cotton Valley Sands, Haynesville Shale, Austin Chalk and Eaglebine formations.

Crude oil logistics assets

Crude oil logistics assets currently consist of two crude oil transloading facilities: (i) the Wildcat facility located in Carbon County, Utah, where FISH currently operates one skid transloader and two ladder transloaders, and (ii) the Big Horn facility located in Big Horn County, Wyoming, where FISH currently operates one skid transloader and one ladder transloader. Transloaders are used to unload crude oil from tanker trucks and load crude oil into railcars and temporary storage tanks. Wildcat and Big Horn facilities provide transloading services for production originating from well-established crude oil producing basins, such as the Uinta and Powder River Basins, which FISH believes are currently underserved by competitors.

Fee-Based Commercial Agreements

Following the closing of the IPO, FISH will have multiple fee-based commercial agreements in place with Anadarko Petroleum Corporation (AES), substantially all of which will include minimum volume commitments and annual inflation adjustments that will initially be the source of a substantial portion of  revenues.

NOTE:  there is some confusion here

FISH proudly refers to “Anadarko Petroleum Corporation (AES)” on which there is mimimal information.

Perhaps FISH is hoping investors will make a mistake and connect their ‘Andadarko Petroleum Corporation’ with the real one which has a market capitalization of $45 billion (with a B).

And check out FISH’s Rube Goldberg organization chart

Customers

The primary suppliers of natural gas to FISH are a broad cross-section of the natural gas producing community. These suppliers include small and large exploration and production companies, large pipeline companies and natural gas marketers. Among those customers currently supplying natural gas to us for treating and processing are Anadarko, Kinder Morgan, Energy Transfer and AES

Competition

Competition in obtaining new customers for transloading services include Crosstex Energy, L.P., Rose Rock Midstream, LP and private logistics companies transloading crude oil in the areas in which we operate.

Sponsor

The sponsor, NuDevco Partners, LLC, is the ultimate parent company of Spark Energy. NuDevco is wholly owned by W. Keith Maxwell III, who founded the predecessor of Spark Energy in 1999 and grew the company from a Houston-based regional retail natural gas company to a multi-state certified retail electricity and natural gas supplier operating in 17 states and 45 local markets, with revenues of $648.8 million for the year ended December 31, 2012.

In addition to Spark Energy, NuDevco also owns NuDevco Midstream Development and indirectly owns AES. NuDevco Midstream Development’s primary strategy is to purchase and develop midstream natural gas and crude oil logistics assets. AES primarily purchases, sells and markets natural gas, NGLs and crude oil.

Minimum quarterly distribution
$0.35 per unit for each whole quarter, or $1.40 per unit on an annualized basis, which is 7% on an annualized basis.

Percentage of Total Common and Subordinated Units to be Beneficially Owned

NuDevco Partners, LLC, 64.2%
About NuDevco Partners
http://www.linkedin.com/company/nu-devco-partners

Use of proceeds

FISH expects to net $117 million from its IPO.  Proceeds are allocated to repay $2.5 million in IPO expenses, and then to repay debt.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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