Oiltanking Partners LP (OILT): One Company Poised to Benefit From the Shale Gas Boom

Kinder Morgan Energy Partners LP (NYSE:KMP) is planning to spend approximately $10 billion in 2013 to acquire midstream assets in the United States. Energy Transfer Partners, over the last three years, has made several major acquisitions and launched close to $3 billion worth of organic growth projects. Below, let’s analyze Oiltanking’s performance with these industry giants.

Source: Morningstar

The table above shows the E I Du Pont De Nemours And Co (NYSE:DD) analysis of Oiltanking Partners with Energy Transfers Partners and Kinder Morgan Energy. The company has a net margin of almost 90% while the industry’s leaders have a net margin of less than 6%. The asset turnover figure shows that Oiltanking Partners is able to convert its asset into revenue in the same proportion as Kinder Morgan Energy.

The company has the least amount of financial leverage in comparison to Energy Transfers Partners and Kinder Morgan Energy, which means that it faces relatively lower amounts of debt-servicing costs and liquidity risk. The ROE for Oiltanking Partners comes out to a staggering 53.4%, which is surprisingly better than what the industry leaders report. Energy Transfers Partners and Kinder Morgan Energy reported ROE of 4.7% and slightly less than 5.0%, respectively.

Conclusion

Oiltanking partners’ revenue comes from the long-term fixed-fee contracts with upstream and downstream companies alike. The company’s midstream business is largely defensive. Due to fracking, natural-gas supply has skyrocketed in the United States. Many integrated oil and gas companies want to exploit the arbitrage that exists in natural-gas prices abroad. LPG is a way oil and gas companies can export natural gas.

Oiltanking has grabbed this opportunity by adding to LPG export processing capacity. The comparative performance of the company is surprisingly better than the industry leaders. I would, therefore, give the buy recommendation to the investors.

Awais Iqbal has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article One Company Poised to Benefit From the Shale Gas Boom originally appeared on Fool.com and is written by Awais Iqbal.

Awais is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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