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IPO Analysis: PennTex Midstream Partners LP (NYSE: PTTX)

By Roger S. Conrad on Nov. 18, 2014

PennTex Midstream Partners LP’s (NYSE: PTXP) initial asset base will consist of gas-gathering pipelines and -processing plants in Northern Louisiana that operate under long-term contracts with primary customer, Memorial Resource Development Corp (NSDQ: MRD).

These agreements include minimum volume commitments and firm capacity reservations, terms that should guarantee a reliable stream of cash flow. PennTex Midstream Partners’ most recent registration statement indicated that actual throughput should easily exceed these minimum commitments.

Drop-down transactions from sponsor PennTex Development, which is wholly owned by private-equity outfit NGP Gas Partners, will be part of PennTex Midstream Partners’ near-term growth story.

The MLP has the right of first offer with respect to any of PennTex Developments’ under-construction or future midstream assets in the area of mutual interest depicted below.

PTXP AMI

At present, the Mount Olive gas-processing plant and related pipeline infrastructure are the sole drop-down candidates. This system, which can handle up to 200 million cubic feet per day of throughput, is slated for completion in October 2015 and will operate under a 15-year contract with Memorial Resource Development.

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