valero energy partners' first acquisition
DESCRIPTION
Valero Energy Partners recently announced its first dropdown acquisition from Valero Energy.TRANSCRIPT
![Page 1: Valero Energy Partners' First Acquisition](https://reader034.vdocuments.net/reader034/viewer/2022051512/53f1bf098d7f72104c8b4b8a/html5/thumbnails/1.jpg)
Valero Energy Partners’ First Acquisition
![Page 2: Valero Energy Partners' First Acquisition](https://reader034.vdocuments.net/reader034/viewer/2022051512/53f1bf098d7f72104c8b4b8a/html5/thumbnails/2.jpg)
Growth MLPs like Valero Energy Partners will continue to see interest from investors as it gets harder and
harder for mature MLPs to move the needle.
The partnership recently announced its first acquisition from parent company Valero (NYSE: VLO).
Let’s take a closer look.
Why Valero Energy Partners?
![Page 3: Valero Energy Partners' First Acquisition](https://reader034.vdocuments.net/reader034/viewer/2022051512/53f1bf098d7f72104c8b4b8a/html5/thumbnails/3.jpg)
Like any deal, investors need to know a few things:
• Which assets?• How much did the deal cost?• How will the deal be funded?• How long will it take the acquisition to pay for
itself?
What are we looking for?
![Page 4: Valero Energy Partners' First Acquisition](https://reader034.vdocuments.net/reader034/viewer/2022051512/53f1bf098d7f72104c8b4b8a/html5/thumbnails/4.jpg)
The assets
• 72,000 bpd throughput
• 200 miles of pipe• 20 oil truck
unloading sites• 240,000 bbls of
storage
The McKee Crude System
Credit: Valero
![Page 5: Valero Energy Partners' First Acquisition](https://reader034.vdocuments.net/reader034/viewer/2022051512/53f1bf098d7f72104c8b4b8a/html5/thumbnails/5.jpg)
The assets
• Located in the Eagle Ford
• 11 oil truck unloading sites
• 1 mile pipe: 110,000 bpd
Three Rivers Crude System
Credit: Valero
![Page 6: Valero Energy Partners' First Acquisition](https://reader034.vdocuments.net/reader034/viewer/2022051512/53f1bf098d7f72104c8b4b8a/html5/thumbnails/6.jpg)
The assets
• 30-mile pipe: 90,000 bpd
• 180,000 barrels storage
• Connects Ardmore refinery to Magellan products system
Wynnewood Products System
Credit: Valero
![Page 7: Valero Energy Partners' First Acquisition](https://reader034.vdocuments.net/reader034/viewer/2022051512/53f1bf098d7f72104c8b4b8a/html5/thumbnails/7.jpg)
Price
• Deal closes July 1• Assets supported by 10-year transportation and
terminaling agreements• Minimum throughput agreements account for
90% of expected volume.
$154 million
![Page 8: Valero Energy Partners' First Acquisition](https://reader034.vdocuments.net/reader034/viewer/2022051512/53f1bf098d7f72104c8b4b8a/html5/thumbnails/8.jpg)
Where’s the money coming from?
The deal will be funded by cash on hand
(which means it won’t dilute current unitholders, nor will VLP have to issue debt.)
![Page 9: Valero Energy Partners' First Acquisition](https://reader034.vdocuments.net/reader034/viewer/2022051512/53f1bf098d7f72104c8b4b8a/html5/thumbnails/9.jpg)
EBITDA multiple
The assets are expected to contribute EBITDA of $15.4 million in their first full year of operation.
Given the $154 million price tag, this deal has an EBITDA multiple of 10x, meaning it will take 10 years for these assets to pay for themselves.
![Page 10: Valero Energy Partners' First Acquisition](https://reader034.vdocuments.net/reader034/viewer/2022051512/53f1bf098d7f72104c8b4b8a/html5/thumbnails/10.jpg)
Industry context
Let’s compare this deal to Phillips 66 Partners’ first deal to
give the acquisition some context.
![Page 11: Valero Energy Partners' First Acquisition](https://reader034.vdocuments.net/reader034/viewer/2022051512/53f1bf098d7f72104c8b4b8a/html5/thumbnails/11.jpg)
Industry context
VLP PSXP
Assets 272,000 bpd/180,000 bbls storage
132,000 bpd/4.3 million bbls storage
Price $154 million $700 million
EBITDA mult. 10x 10x – 10.7x*
*PSXP gave a range of expected EBITDA for the first full year of operations for its acquisition.
![Page 12: Valero Energy Partners' First Acquisition](https://reader034.vdocuments.net/reader034/viewer/2022051512/53f1bf098d7f72104c8b4b8a/html5/thumbnails/12.jpg)
Industry context
A 10x EBITDA multiple seems to be the norm with these dropdowns. Tesoro Logistics paid something similar for one of its dropdowns last year as well.
So far, Valero Energy Partners seems to be sticking to close to the MLP-spinoff pack.
![Page 13: Valero Energy Partners' First Acquisition](https://reader034.vdocuments.net/reader034/viewer/2022051512/53f1bf098d7f72104c8b4b8a/html5/thumbnails/13.jpg)
Key takeaways
Solid first acquisition for VLP:Filling out its asset footprint at a reasonable price
What to watch:How much EBITDA does this system actually generate for VLP? Q3, Q4 earnings will be telling.
![Page 14: Valero Energy Partners' First Acquisition](https://reader034.vdocuments.net/reader034/viewer/2022051512/53f1bf098d7f72104c8b4b8a/html5/thumbnails/14.jpg)
A few more dividend ideas – Free