IPO Report: Phillips 66 Partners LP

Francis Gaskins |

Based in Houston, TX, Phillips 66 Partners LP ($PSXP) scheduled a $300 million IPO with a market capitalization of $1.4 billion at a price range mid-point of $20, for Tuesday, July 23, 2013.

Ten other IPOs were scheduled for the week of July 15. The full IPO calendar can be found at IPOpremium.

  • S-1 filed July 15, 2013
  • Manager, Joint Managers: J.P. Morgan; Morgan Stanley
  • Co Managers: BofA Merrill; Barclays; Credit Suisse; Deutsche; Citigroup; RBC; RBS; DNB; Mitsubishi UFJ Securities; Mizuho Securities; PNC Capital Markets

Summary

PSXP is a mid-stream pipeline Master Limited Partnership created by Phillips 66 (PSX), which has a $35 billion market capitalization.

PSXP intends to provide a 4.25%, but there's no growth between the 12 months ended March '13 and the 12 months ended March '14.

Valuation

PSXP's dividend is significantly lower than (KMP) and (WPZ) , the P/E ratio is higher and the Price/EBTIDA is much higher. The price-to-book is also higher.

And the forecast for the 12 months ending March '14 is flat compared to the 12 months ended March '13.

Compare with other MLPs

Mrkt

Price /

Price /

Price/

Price /

Dividnd

2012 12 mos

Cap (MM)

Sls

Erngs

EBITDA

BkVlue

Yield

Phillips 66 Partners LP

$1,436

12.9

16.1

19.1

3.4

4.25%

Kinder Morgan Energy Partners (KMP)

$32,810

0.9

6.1

2.4

2.9

6.04%

Williams Partners L.P. (WPZ)

$20,690

2.8

4.2

2.3

2.3

6.52%

             
             
             
             

Conclusion

Based on the comparative valuation metrics PSXP looks over priced. However, PSXP is an 'instant bluechip' that will be included in institutional segment portfolios, so the rating is positive.

To put the above conclusions and observations in context, the following is reorganized, edited, and summarized from the full S-1 referenced earlier:

Business

PSXP is a traditional master limited partnership (MLP) recently formed by Phillips 66 to own, operate, develop and acquire primarily fee-based crude oil, refined petroleum product and natural gas liquids ("NGL") pipelines and terminals and other transportation and midstream assets.

Initial assets consist of crude oil and refined petroleum product pipeline, terminal and storage systems in the Central and Gulf Coast regions of the United States that are integral to the Phillips 66 refining and marketing operations they support.

Initial assets http://gaskinsco.com/psxp-assets.png

PSXP generates revenue primarily by charging tariffs and fees for transporting crude oil and refined petroleum products through its pipelines and terminaling and storing crude oil and refined petroleum products at our terminals. PSXP does not take ownership of the crude oil or refined petroleum products transport, terminaled and stored, and does not engage in the trading of any commodities.

Phillips 66

Post IPO PSXP will have multiple commercial agreements with Phillips 66 that will initially be the source of substantially all revenue. These agreements will be long-term, fee-based agreements with minimum volume commitments and inflation escalators. PSXP believes these agreements will promote stable and predictable cash flows.

Organizational structure

http://gaskinsco.com/psxp-org.png

Competition

PSXP believes that its crude oil and refined petroleum product pipelines, terminals and storage facilities will not face significant competition from other pipelines, terminals and storage facilities for Phillips 66's crude oil or refined petroleum products transportation requirements to and from the supported refineries…

as a result of contractual relationship with Phillips 66 under commercial agreements and PSXP's direct connections to three of Phillips 66's refineries,

Use of proceeds

PSXP expects to net $278 million from its IPO.

PSXP expects to use the majority of the IPO proceeds for potential future acquisitions, such as the potential acquisition from Phillips 66 of the right of first offer assets.

 

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

Companies

Symbol Name Price Change % Volume
CSPUF Canadian Spirit Res Inc 0.08 -0.01 -7.78 200
PSX Phillips 66 79.74 0.27 0.34 1,132,147

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