NGL Energy Partners Sets Unit Offering Price Tag - Analyst Blog

Tulsa, OK-based NGL Energy Partners L.P. NGL has priced a public offering of 8,000,000 common units at $43.85 a piece, with a 30-day over-allotment option for an additional 1,200,000 units. The offering, which was announced on Jun 17, is likely to close on Jun 23.

The transporter and marketer of crude oil and natural-gas liquids plans to use the net proceeds from this offering – including exercise of underwriters' option to buy additional common units  – to repay the debts and for general partnership purposes like capital expenditures and potential acquisitions.

NGL Energy Partners, which agreed to buy Morgan Stanley's MS ownership interests in its oil storage business TransMontaigne Partners L.P. TLP earlier this month for $200 million – is a diversified midstream partnership engaged in providing multiple services to producers and end-users. The entity's operations include transporting and marketing of crude oil, water solutions, and transporting and marketing of natural gas liquids.

With a successful track record of growth, presence in most of the prolific crude oil producing regions in North America and conservative capital structure with low leverage, NGL Energy Partners is primed for peer-leading returns. Moreover, a track record of consistent distribution hike, together with a business model focused on operational efficiencies and attractive acquisitions/growth projects, makes the partnership a good choice for investors looking for a steady, predictable income stream.

Having done a stellar job at generating stable fee-based cash flows from its diversified and attractive asset base, analysts are predicting strong earnings growth for NGL Energy Partners over the next couple of years. The 2014 Zacks Consensus Estimate is $1.78, representing whopping 249% earnings per unit growth over 2013. Next year's average forecast is $2.04, corresponding with 14% growth.

But units of NGL Energy Partners – currently trading at $42.50 – have already climbed 26% since the beginning of the year. Therefore, any upside from here may be limited.

As a result, NGL Energy Partners currently retains a Zacks Rank #3 (Hold), implying that it is expected perform in line with the broader U.S. equity market over the next one to three months.

However, a better-ranked energy pipeline partnership would be Alon USA Partners L.P. ALDW. It carries a Zacks Rank #1 (Strong Buy).