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Oiltanking Partners Ready to Run With Giants

NEW YORK (TheStreet) -- Oiltanking Partners (OILT) is a little-known master limited partnership, or MLP, poised for long term growth.

Oiltanking, with a market cap of nearly $3 billion, provides terminaling, storage and transportation services to other energy companies. Although its shares are currently looking expensive, they will likely continue going higher due to ongoing expansion work and a favorable business environment that will fuel its growth.

Oiltanking's units have risen by 21% year to date and was dropping 1.2% to $75.41 on Monday.

Oiltanking was listed just a couple of years ago. It is a subsidiary of the German company Oiltanking, which is the world's second-biggest independent tank storage provider. The group operates 73 terminals in 22 different countries, including seven in the U.S.

Oiltanking's biggest strength is its high quality asset base which includes its Houston and Beaumont facilities. Both facilities are equipped with deep-water ship and barge docks and 22 million barrels of active storage capacity. Nearly 99% of the company's active capacity is currently under contract.

The two facilities are connected to nearly two dozen refining, production and storage facilities at the Gulf Coast and Cushing. Moreover, the Houston facility also serves as an export facility for refined petroleum products.

Oiltanking's Houston facility is the backbone of its operations. It is one of the biggest third-party terminaling facilities on the Houston ship channel and one of the biggest LPG marine export terminals in the world. The Houston facility has two terminals, Houston and Appelt.

Moreover, OIltanking has a strong and diverse customer base. Two of its biggest customers are Enterprise Product Partners (EPD) and Exxon Mobil (XOM), which accounted for 29% and 9% of its 2013 revenues respectively.

OIltanking usually engages with these customers through long-term, inflation adjusted contracts that have minimum volume commitments. For its services, Oiltanking charges storage and throughput fees. Oiltanking usually gets approximately 60% of its revenues from storage fees and 40% from throughput fees.

Over the last five years, Oiltanking has been able to consistently grow its top and bottom line. Since 2009, the MLP's revenues and earnings have more than doubled.

 

In thousands, except per share amount

 

2009

2010

2011

2012

2013

Total Revenue

$100,840

$116,450

$117,377

$135,497

$210,950

Operating income

$43,410

$57,662

$52,238

$64,702

$125,500

Net income

$25,116

$37,815

$62,397

$62,645

$117,063

Adjusted EBITDA

$57,852

$68,260

$67,530

$80,616

$145,275

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