Must-know: An overview of Genesis Energy (Part 1 of 5)
Genesis Energy L.P. (GEL), is a midstream energy master limited partnership (or MLP) headquartered in Houston, Texas. GEL focuses on the midstream segment of the oil and gas industry in the Gulf Coast region of the United States and the Gulf of Mexico (or GOM). It manages business in three divisions—Pipeline Transportation, Refinery Services, and Supply and Logistics. These portfolios of assets are used to service oil producers, refineries, and industrial and commercial enterprises. The Pipeline Transportation division is engaged in the pipeline transportation of crude oil and carbon dioxide. Customers for this segment include Denbury Resources (or DNR). The Refinery Services division primarily processes sour gas streams to remove sulfur at refining operations. Customers for this segment include International Paper (or IP) and BHP Billiton (or BHP). The Supply and Logistics division is engaged in the transportation, blending, storage, and supply of energy products including crude oil, refined products, and carbon dioxide (or CO2). Customers for this segment include Shell Chemicals (or RDSA). GEL is a part of the Alerian MLP ETF (AMLP) and DNR is a part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).
GEL’s General Partner is Genesis Energy LLC, a wholly owned subsidiary that owns a non-economic general partner interest in GEL L.P. Denbury Resources used to own the general partner of Genesis Energy L.P. and sold it in February, 2010.
Genesis operations are primarily located in Texas, Louisiana, Arkansas, Mississippi, Alabama, Florida, Wyoming, and the Gulf of Mexico.
The company owns four separate pipeline networks running approximately 480 miles across Texas, Alabama, Mississippi, and Florida. These are used to transport crude oil. Genesis also owns 270 miles of pipeline used to transport CO2, primarily Free State Pipeline and Northeast Jackson Dome (or NEJD) Pipeline. It also owns 1,050 miles of offshore pipeline, primarily supporting deepwater production.
Refinery Services uses caustic soda (or NaOH) to remove sulfur from natural gas during the refining process. This process generates large amounts of sodium hydrosulfide (or NaHS), which the company sells to customers in the mining, paper, and pulp industries. The company owns and leases NaHS and NaOH terminals in Gulf Coast, Midwest, Montana, British Columbia, Utah, and South America.
Supply and Logistics
Genesis Energy L.P. also has a large supply and logistics business, including marine transportation and rail services. The company owns crude oil and refined products storage and transportation assets, including trucks and barges.
GEL has a market cap of ~$ 5 billion and an enterprise value of $ 6.2 billion. It’s currently trading at a 2014 EV/EBITDA (enterprise value to earnings before interest, taxes, depreciation, and amortization) of ~19x (as of July 2).
1Q14 adjusted EBITDA totaled $66.6 million, compared to 4Q13 adjusted EBITDA of $62 million—an increase of approximately 8%. Genesis declared a distribution of $0.55 for 1Q14, resulting in an implied annual distribution yield of 4%. The company experienced distribution growth of over 11% (on an annualized basis) over the past one year and three year periods.
Total capex for fiscal year 2013 was $310 million which includes the Southeast Keathley Canyon Pipeline Company LLC (or SEKCO) joint venture with Enterprise Products (EPD) and the Baton Rouge terminal project around ExxonMobil’s (XOM) Baton Rouge refinery complex. Both these projects are stated to be complete by mid-2014 and accelerate into 2015, contributing to a higher distribution growth.
In its 1Q14 reports, GEL announced an increase in its first quarter earnings to $0.55 per unit. This represents an increase of approximately 2.8% sequentially and 10.5% year-over-year (or YoY), resulting in distribution coverage ratio of 1.10x.
The previous graph shows that Genesis Energy has been consistently increasing its distribution, which indicates financial stability that may attract investors looking for a steady income. GEL has a distribution yield of 4 %.
Continue reading the next section in this series to learn about GEL’s assets in greater detail.
Browse this series on Market Realist:
- Part 2 - Overview: Genesis Energy’s assets and operations
- Part 3 - Overview: Genesis Energy’s 1Q14 earnings and key statistics
- Part 4 - Must-know: Genesis Energy’s outlook for 2014 and 2015
- Oil, Gas, & Consumable Fuels
- Investment & Company Information
- Genesis Energy
- Gulf of Mexico