2 New MLPs That Are Worth a Closer Look

The Class of 2013

A staggering 20 master limited partnerships went public last year

The Class of 2013

SCXP CVRR USAC NSLP KNOP EMES TEP PSXP FISH QEPM WPT OCIR OCIP WNRL PAGP SRLP MEP ARCX DLNG VLP

Big Potential

MLP fund flows continue to increase in 2014, and actively managed funds are going after young MLPs with big potential.

Big Potential

Some of the most compelling MLPs on the market today debuted last

year. Now that they have a few quarters under their belt, here are

two you don’t want to miss.

Phillips 66 Partners

• Market debut: 7/13• Common units

outstanding: ~38.7 million

• General partner Phillips 66 controls > 50% of common units

NYSE: PSXP

Key events

July 23, 2013

Dist. $0.155(Pro-rated)

Dist. $0.225

5/1/14

Gold Line acquisition $700 million

Units close at ~$65, +182%

PSXP prices at $23

10/31/13 1/31/14

2/13/14

Dist. $0.274

Mid-June

Key statistics

• Total pipeline capacity: 775,000 barrels/day• Total storage capacity: 12.2 million barrels• Total dock throughput: 57,000 barrels/hour

• Adjusted EBITDA up 62% since IPO• Quarterly distribution up 29% since IPO

Why invest?• 5 different asset systems, including crude oil

pipelines, terminal storage, refined products pipelines, and propylene storage.

• Each asset backed by fee-based agreement with Phillips 66, including minimum volume commitments and inflation escalators

• Parent-company is midstream-focused• Dropdown opportunities aplenty, given PSX’s asset

footprint

Valero Energy Partners

NYSE: VLP

• Market debut: 12/13• Common units

outstanding: ~28.8 million

• General partner Valero controls < 50% of common units

Photo credit: flickr/Anthony Qunitano

Key statistics• 3 pipeline systems supporting 3 refineries with

675,000 bpd combined capacity• Generated $13.57 million in distributable cash

flow in Q1 2014• Units are up ~92% from IPO price• Distribution coverage ratio at 1.09 times

distributions in the most recent quarter

Why invest?• Fee-based contracts with Valero drive revenue• Right of first offer for Valero asset acquisitions,

including six different systems or storage assets• Growth is imminent: Dropdowns are slated to

begin in the third quarter of 2014• Management expects to grow distributions by

about 20% each year for the next three years

Key takeaways

• Both of these MLPs are small and new, but are driven by fee-based contracts from mature businesses

• Asset footprint growth story is relatively transparent

• Investors can expect distribution growth and adequate coverage for the foreseeable future

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