Wells Fargo Upgrades SemGroup Energy Partners, L.P. (SGLP) to Outperform; Positive on Vitol Acquisition
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Wells Fargo upgrades SemGroup Energy Partners, L.P. (OTC: SGLP) from Market Perform to Outperform. valuation range increased to $11-13/unit from $6-8/unit.
Wells analyst says, "We are upgrading SGLP to Outperform on news that SGLP’s general partner was acquired by Vitol Inc. (a global commodity trader). The acquisition should accelerate the timetable for a reinstatement of the distribution to 2010, increase cash flow to the partnership, and potentially drive future distribution growth at SGLP. We are increasing our 2010 and 2011 DCF/unit estimates to $1.13 and $1.54, respectively from $0.95 and $1.48."
"The Vitol acquisition of SGLP’s GP could create several positive catalysts for the partnership. (1) The transaction severs all ties with SemGroup L.P., (2) Vitol could make an equity investment in SGLP to de-lever the partnership (3) This should accelerate a re-negotiation of SGLP’s credit facility on more favorable terms. (4) Thus, a re-instatement of the distribution seems more likely in 2010. (5) Vitol’s crude oil marketing and trading prowess could increase throughputs on SGLP’s assets and EBITDA over time. (6) Longer-term, SGLP could pursue dropdown acquisitions from Vitol of its storage terminals, which could lead to future distribution growth."
SemGroup Energy Partners, L.P. provides terminalling, storage, gathering, and transportation services for companies engaged in the production, distribution, and marketing of crude oil and liquid asphalt cement in the United States.
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