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Asset Acquisitions Fuel Valero Energy Partners’ EBITDA Growth

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Valero Energy Partners’ EBITDA

Valero Energy Partners’ (VLP) year-to-date total returns are 22%. It’s EBITDA (earnings before interest, tax, depreciation, and amortization) in 2Q15 grew 183% year-over-year. Valero Energy Partners’ EBITDA increased from $21 million in 4Q13 when the MLP began trading on the New York Stock Exchange to $42.7 million in 2Q15. VLP has generated 91% total returns, including dividends, since listing.

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Valero Energy Partners and VLO

The above graph shows Valero Energy Partners’ quarterly EBITDA since its listing. Valero Energy Partners was formed by Valero Energy Corporation (VLO) to own and operate crude oil and refined petroleum products pipelines, terminals, and other logistics assets.

Valero Energy Partners supports VLO’s business. VLP’s crude oil and refined products pipeline and terminals in the Gulf Coast and Mid-Continent regions are integral to the operations of VLO’s refineries. So Valero Energy Partners benefits from VLO’s growth.

VLP’s revenues are primarily fee-based. The revenues depend on its volume of crude oil and refined products transported and stored. It should be noted that all of VLP’s operating revenues are from services provided to VLO.

Acquisitions contributed to the growth

Valero Energy Partners acquired two crude oil and refined products terminals from VLO on March 1, 2015. The terminals are the Houston terminal in Texas and the St. Charles terminal in Louisiana. The increase in VLP’s 2Q15 EBITDA can primarily be attributed to additional income from the Houston and St. Charles terminals. The two terminals didn’t charge VLO for services and didn’t generate revenues prior to their acquisition by VLP.

VLP forms ~4% of the Global X Junior MLP ETF (MLPJ), which targets small-cap MLPs. The Global X MLP ETF (MLPA), on the other hand, focuses on large-cap MLPs. Enbridge Energy Partners (EEP), Enterprise Products Partners (EPD), Genesis Energy (GEL), and NuStar Energy (NS) are some other MLPs that operate crude oil pipelines.

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