OCI Partners LP (OCIP), a Texas-based operator of a methanol and ammonia production facility located near Beaumont, Texas, plans to raise $350 million in its upcoming IPO by selling 17.5 million shares at an expected price range of $19.00-21.00 on Friday, October 4th. At the midpoint of that range at $20.00 per share, OCIP would command a market value of $1.6 billion.
OCIP filed on June 14, 2013
Joint Managers: BofA Merrill Lynch, Barclays, Citi
Co-Managers: Allen & Co, J.P. Morgan
OCIP operates a Texas Gulf Coast methanol and ammonia production facility. It is currently the country's largest merchant methanol producer at approximately 730,000 metric tons per year; annual ammonia production is approximately 265,000 metric tons per year. ICIP is also working aggressively to expand it's production capacity.
OCIP offers the following figures in its S-1 balance sheet for the six months ending June 30, 2013:
Net Income: $81,002,000
Total Assets: $438,907,000
Total Liabilities: $561,787,000
Members' Equity: ($195,656,000)
OCIP is a promising buy for those seeking a steady income from their investments. The main draw of the IPO is the likelihood of significant future cash distributions; OCIP estimates that it will generate $173.1 million cash available for distribution in the year ending September 30, 2014, which equates to $2.15 per unit. For the three months ending December 31, 2014, OCIP estimates that it will generate $69.9 million cash available for distribution, or $0.868 per unit. These cash distributions could quickly give us a yield of over 10%.
Methanol and ammonia are both used in numerous industrial applications. Methanol is used to produce plywood, laminates, resin, and paint removers, among others, and is also blended with gasoline to act as fuel. Ammonia is used as feedstock to produce nitrogen fertilizer and is also used in the industrial production of plastics and resins. Put simply, the demand for these products will not soon disappear; in fact, demand for both products is currently on the rise in the United States.
OCIP faces significant competition in the global markets for methanol and ammonia. Trinidadian methanol producers in particular have traditionally been the largest suppliers in the U.S., and may have a competitive advantage simply from the perspective of established client relationships. Some of these competitors may have greater resources and less reliance on earnings from methanol and ammonia. Major competitors include Methanex (MEOH), Lyondell Basell (LYB) and Celanese (CE).
President and CEO Frank Bakker has previously served as Vice President and General Manager of OCIB. CFO Fady Kiama has over 22 years of experience in financial management and accounting.
Additional disclosure: Investors should read the S-1 and consult with their financial advisor before making any purchases.