Valero Energy Partners’ profit up 9%, beats estimates

Higher volumes handled by its pipeline systems and lower general and administrative expenses helped Valero Energy Partners LP post higher net income for the fourth quarter, the partnership said Thursday.

Valero Energy Partners’ fourth-quarter net income rose 9 percent, to $19.1 million, or 32 cents a unit, compared with $17.5 million, or 3 cents a unit, for the year-earlier period.

The San Antonio-based master limited partnership, which owns logistics assets, beat analysts’ estimates that it would earn 29 cents a unit in the quarter.

The partnership generated earnings before interest, income, taxes and other costs of $23.7 million and distributable cash flow of $22.6 million. The partnership’s distribution coverage ratio for the fourth quarter was 1.43 times.

“The partnership finished its fourth quarter and first full year with strong performance,” Chairman and CEO Joe Gorder said in a statement.

“In January 2015, we announced an increase in the partnership's quarterly distribution to 26.6 cents a unit, or almost 11 percent above the previous quarterly distribution and 25 percent above the minimum quarterly distribution,” Gorder said.

“We are pleased to have delivered to our unit holders growth in distributions near the top end of our targeted range.”

Fourth-quarter revenues rose 3 percent, to $34.2 million, compared with $33.1 million for the year-earlier period. Analysts had expected revenue of $33 million.

The partnership said it handled higher volumes at its systems that are integrated with Valero Energy Corp. refineries at Port Arthur, Three Rivers and Memphis, Tennessee.

Valero Energy Partners’ units closed Thursday at $51, up 85 cents.

By year’s end, the partnership expects to fatten up with its purchase of about $1 billion worth of logistics assets from Valero Energy.

With $237 million in cash and $200 million in borrowing capacity, the partnership “possesses significant financial flexibility to fund this growth,” JP Morgan analyst Jeremy Tonet said in a note to clients.

In a conference call, Tonet asked whether lower commodity prices, such as oil prices, would have an effect. “The answer to that is no,” partnership President and Chief Operating Office Rich Lashway said. “We don’t have any commodity exposure.”

Nor would low crude prices prompt Valero Energy to delay sales of logistics assets to the partnership this year. “There are no projects that we are contemplating that are at risk in a low-crude environment,” Lashway said.

Refiner Valero Energy Corp. formed the partnership in July 2013 to own, develop and acquire logistics assets. The partnership completed its initial public offering in December 2013.