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Key takeaways from Martin Midstream Partners’ analyst meeting

Avik Chowdhury

Key takeaways from Martin Midstream Partners' analyst meeting (Part 1 of 7)

Martin Midstream Partners

Martin Midstream Partners LP (MMLP) is a master limited partnership that collects, transports, stores, and markets petroleum products and by-products in the Gulf Coast region of the United States. The company has four primary business lines, including terminaling and storage services for petroleum products, natural gas liquids distribution services and storage, sulfur and sulfur-based products gathering, processing, marketing, manufacturing, and distribution, and marine transportation services for petroleum products.

As of March 31, 2014, the company had a market cap of $1.1 billion, and an enterprise value of $1.8 billion. MMLP’s revenue for LTM (the last 12 months) as of December 31, 2013, totaled $1.6 billion. Adjusted EBITDA over the same period was $137.9 million. Distributable cash flow (or DCF) during the same period was $86.9 million, resulting in distributable cash flow coverage (DCF divided by cash distributions paid out) of 1.03x. On January 23, 2014, MMLP declared a quarterly distribution of $0.785 per unit. As of March 31, 2014, MMLP’s share price was $43.05, resulting in a current yield of 7.3%.

Recently, Martin Midstream Partners (MMLP) gave a presentation updating financial analysts and investors on the current state of the company and how management expects the company to drive growth in the years to come. Some of the key takeaways from the presentation include the following (which we’ll elaborate on in later parts of this series):

  • Robust drilling activity in the Gulf of Mexico and onshore North American shale plays will benefit the company’s strategic asset footprint on Gulf Coast.
  • Completion of Phase III of the Corpus Christi Crude Terminal facility is expected to bring online three oil tanks, each with volume capacity of 100,000 barrels in 2Q14.
  • A partnership with Alinda Capital, an infrastructure investment fund, should enhance MMLP’s ability to invest and inorganic possibilities. A condensate splitter plant has been proposed, to be partly funded by Alinda.
  • A recent natural gas spike is expected to subside following the arrival of spring. The temporary disruption in propane supply is expected to alleviate.
  • The butane logistics business that started in April 2012 has been the largest driver of growth in the natural gas segment. Higher NGL (natural gas liquids) business in the U.S. provides more opportunity for storage and loading activity.
  • The Neches terminal of the company’s Sulfur Services segment will execute a 15,000 LT molten storage tank projects in 2014, which would ease pressure on existing storage tanks for maintenance.
  • The fertilizer business of the Sulfur Services segment has benefited from recent high agricultural prices and robust planted acreage due to higher ethanol demand.
  • The Marine Transportation business may under-perform as a result of stable inland utilization and U.S. Coast Guard mandated dry-docking of entire offshore fleet.
  • MMLP upsized its revolving credit facility for a total commitment of $637.5 million. It will redeem $175.0 million senior notes in 2014. Another $150.0 million senior notes issued in March 2014 will be used to repay revolving credit facility. MMLP has recently commenced a $300 million at-the-money equity program to raise capital.
  • MMLP has approved $61 million growth capital expenditures for 2014. The budget may increase following the identification of additional growth opportunities.

Martin Midstream Partners (MMLP) is a limited partnership that has an integrated distribution network consisting of transportation, terminaling, and storage and midstream logistical services. One of MMLP’s closest comps is Genesis Energy (GEL), which also provides petroleum logistics services and a sulfur services similar in some ways to MMLP’s (though not exactly the same). Other MLPs that engage in terminaling crude and petroleum products include World Point Terminals (WPT) and Tesoro Logistics (TLLP). GEL and TLLP are also components of the major MLP ETF, the Alerian MLP ETF (AMLP).

Continue to Part 2

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