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IPO Analysis: PES Logistics Partners LP (NYSE: PESL)

By Roger S. Conrad on Nov. 18, 2014

PES Logistics Partners LP (NYSE: PESL) owns a 45 percent interest in North Yard Logistics, an operating company whose cornerstone asset is a rail unloading terminal that can accommodate up to three 120-railcar unit trains per day.

This facility supplies crude oil to its sponsor’s Philadelphia refining complex—the largest on the East Coast—under a 10-year contract that includes inflation escalators and minimum volume commitments.

Philadelphia Energy Solutions, which owns and operates the refinery, is a 70-30 joint venture between private-equity giant The Carlyle Group (NYSE: CG) and Sunoco, which is now a part of Energy Transfer Partners LP (NYSE: ETP)

Rail has emerged as an important link between producing basins and end-markets that can’t be reached via existing pipelines. In fact, this mode of transportation has single-handedly revived the profitability of East Coast refineries by supplying them with discounted crude oil produced in North Dakota’s Bakken Shale.

PES Logistics Partners also has the right to purchase a rail terminal that handles natural gas liquids (NGL). This facility, which is expected to come onstream in the fourth quarter, will take advantage of surging production from the nearby Marcellus Shale that has overwhelmed the region’s existing transportation capacity and trades at a discount to other regions.

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