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Phillips 66 Message Board

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  • sollid_companiess_only sollid_companiess_only Dec 13, 2012 5:11 PM Flag

    PSX MLP inside the COP 401K

    PSX MLP shares will not be issued to COP or PSX shareholders. The MLPs will be sold on the market, under an IPO, and after the initial IPO sale they will be sold as a separate entity.

    If you own shares of COP/PSX inside or outside of your 401k plan, you won't receive shares of PSX MLPs, unless you decide to buy them.

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    • Finally someone who knows that this is a seperate issue and that there is nothing in it for holders of PSX unless they buy the MLP. I'm reading all these posts about a spin off and wondering how the posters came up with that idea. As Sollid says its a seperate stock issue and unless you BUY it you get nothing from owning either COP or PSX.

      • 1 Reply to jimbo1392
      • PSX intends to move assets (pipe & rail) "off" their balance sheet in the formation of this MLP entity.
        PSX shareholders (owners of company) must be compensated for these assets in some fashion.
        Whether the compensation takes the form of cash to PSX, cash to shareholders, or shares of new MLP to shareholders, or some election/combination, is up to the Board of Directors to devise.
        Shareholders will be compensated; the method is yet to be established.
        After the IPO, the MLP will be a separate entity trading on its own. PSX intends to retain a large % of ownership in the new MLP, and will manage it as the General Partner.
        This is how I understand the deal will operate.
        This is a trend in the Energy patch, most of the big consolidated Oil players have gone this way.
        Good Luck.

    • Ok...but won't the PSX shareholders receive some sort of compensation for part of their original investment in PSX (the transportation assests) being sold off in an MLP IPO...as in cash?
      If so, what form will that take in the COP 401K? A DRIP into COP stock?

      • 4 Replies to copdriper
      • NO, unless you BUY the new MLP you will get ZERO from owning COP or PSX.

      • sollid_companiess_only sollid_companiess_only Dec 16, 2012 10:17 AM Flag

        Copdriper, you ask, "Ok...but won't the PSX shareholders receive some sort of compensation for part of their original investment in PSX (the transportation assests) being sold off in an MLP IPO...?"

        If the MLP IPO offering and subsequent business are successful, then PSX shareholders should benefit, but not from the issuance of MLP shares, cash, or other tangible assets.

        When the IPO occurs, PSX will sell shares of the MLP to the public. The money raised from this sale will go into PSX's assets, giving PSX more assets for capital investment, making it a more valuable company, and, hopefully, raising it's pps. Furthermore, I suspect that PSX will hold on to some shares of the MLP, perhaps a majority of the shares. If this is the case, then PSX and it's shareholders will benefit, pps-wise, if the MLP is successful and brings in nice profits.

        In summary, PSX shareholders can hope to profit from the MLP by money being brought in to PSX from the IPO and from profits that the MLP generates in it's business activities.

      • you will be compensated if you own PSX.... COP has nothing to do with PSX mlp since COP spun offPSX into a completely separate company. Your compensation would come in a choice of several forms, cash, shares of mlp etc.

      • No. The company receives the money. They plan on raising $400 - $500 million. The reason that companies do this is to dump low performing non core assets into the MLP. In this case PSX is the general partner and will continue to have total control over the assets. They then sell some of the units to the public to raise cash. The idea is to use the cash by investing in higher return assets than the ones placed in the MLP. This financial structure allows the company to raise money to expand faster without taking on more debt or watering down earnings by selling stock.

        Here is a theoretical example of what happens. PSX takes all of there rail cars and places them in the MLP. They pay the MLP $10 Million per year for their use. They keep 60% of the MLP units and sell 40% to the public. They get $6 Million dollars back as dividend/earnings from the MLP. However, they take the money that they received from the 40% MLP sale to the public and invest it in businesses that yield $6 Million in revenue. So Now they have $6 Million form the MLP + $6 Million form the new investment or $12 Million. They have increased there earnings by $2 Million without going into debt or issuing more stock and still control all the assets. In addition, they will also invest a lot of their free cash flow. What the MLP did was allow them to grow faster than they ordinarily would. This is why the analysts at all the conference calls were badgering them about an MLP, because they know that geographically PSX is in a great spot and they want them to increase investments in midstream and chemicals.

        Sentiment: Buy

 
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