IPO Preview: MPLX

Oct.26.12 | About: MPLX LP (MPLX)

Based in Findlay, Ohio MPLX (NYSE:MPLX) scheduled a $300 million IPO with a market capitalization of $1.5 billion at a price range mid-point of $20 for Friday, October 26, 2012.

Five other IPOs were scheduled for the week of October 22. The full IPO calendar is available here.

S-1 filed October 18, 2012.

Manager, Joint Managers: UBS Investment Bank; BofA Merrill Lynch; Morgan Stanley; Citigroup; J.P. Morgan.
Co Managers: Barclays; Deutsche Bank Securities; Wells Fargo Securities.

MPLX is an oil mid-stream pipeline company sponsored by Marathon Petroleum (NYSE:MPC). MPC has a market capitalization of $18.5 billion.

MPLX expects to distribute $87 million for the 12 months ended December 2013, with a cash overage of $7.9 million. The annualized minimum distribution rate 5.3% at the price range mid-point of $20.

Valuation Ratios

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Marathon Petroleum





*Projected for the 12 months ended Dec 2013.

MPLX's projected cash distribution rate when MPC's
incentive compensation kicks in


Click to enlarge

We believe MPLX will increase from its IPO price, especially based on the strong sponsorship from the parent/sponsor MPC.

MPLX is a fee-based, growth-oriented limited partnership formed in March 2012 by MPC to own, operate, develop and acquire crude oil, refined product and other hydrocarbon-based product pipelines and other midstream assets.

Primary assets consist of:

- a 51.0% general partner interest in Pipe Line Holdings, a newly-formed entity that owns a 100.0% interest in MPL and ORPL, which in turn collectively own:a network of pipeline systems that includes approximately 962 miles of common carrier crude oil pipelines and approximately 1,819 miles of common carrier product pipelines extending across nine states. This network includes approximately 153 miles of common carrier crude oil and product pipelines that we operate under long-term leases with third parties;

- a barge dock located on the Mississippi River near Wood River, Illinois with approximately 80 mbpd of crude oil and product throughput capacity; and

- crude oil and product tank farms located in Patoka, Wood River and Martinsville, Illinois and Lebanon, Indiana.

- a 100.0% interest in a butane cavern located in Neal, West Virginia with approximately 1.0 million barrels of storage capacity that serves MPC's Catlettsburg, Kentucky refinery.

As the sole general partner of Pipe Line Holdings, MPLX will control all aspects of management of Pipe Line Holdings, including its cash distribution policy.

The only outstanding partnership interests in Pipe Line Holdings will be MPLX's 51.0% general partner interest and the 49.0% limited partner interest retained by MPC.

MPLX believes its network of petroleum pipelines is one of the largest in the United States, based on total annual volumes delivered. MPLX's assets are integral to the success of MPC's operations.

MPLX expects to pay a minimum quarterly distribution of $0.2625, which is an annualized rage of 5.3% at the price range mid-point.

When each unit has received a distribution of $0.301875 (6% annualized range at the price range mid-point), the general partner will receive increasing percentages, up to 48.0%, of the cash MPLX distributes in excess of that amount. MPLX refers to these distributions as "incentive distributions."

MPLX forecasts that its estimated cash available for distribution for the twelve months ending December 31, 2013 will be $87.1 million. This amount would exceed by $7.9 million the amount needed to pay the aggregate annualized minimum quarterly distributions of $79.2 million on all of our units for the twelve months ending December 31, 2013.

MPLX expects to net $277 million from its IPO. Proceeds are allocated as follows:

$191.6 million will be contributed to Pipe Line Holdings, which Pipe Line Holdings will retain on behalf of MPLX and MPC to fund our respective pro rata portions of certain estimated expansion capital expenditures;

$72.9 million will be distributed to MPC in partial consideration of its contribution of assets to MPLX and to reimburse MPC for certain capital expenditures it incurred with respect to these assets;

$10.0 million will be retained for general partnership purposes, including to fund working capital needs; and

$2.7 million will be used to pay revolving credit facility origination fees.

In connection with this offering, MPLX will enter into a $500.0 million revolving credit.

Disclaimer: This MPLX IPO report is based on a reading and analysis of MPLX's S-1 filing which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.