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MLP to Divest U.S. Gas Storage Assets, Focus on Refinery Services
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The benefits of the deal to the partnership are discussed in a Raymond James report.

In a June 10 research note, Raymond James analyst Justin Jenkins reported that Martin Midstream Partners L.P. (MMLP:NASDAQ) agreed to sell Cardinal Gas Storage, its Arcadia, Cadeville, Monroe and Peryville assets, to the private company Hartree Cardinal Gas for $215 million in cash.

The Cardinal assets comprise about 50 billion cubic feet of storage capacity in Mississippi and northern Louisiana. Closing of the transaction is expected at the end of Q2/19.

Jenkins noted the divestiture should achieve two ends for Martin Midstream: stabilize its balance sheet and improve its equity performance.

The master limited partnership's reason for the assets sale was to delever its balance sheet and focus solely on its refinery services operations. Indeed, Jenkins wrote, the transaction should significantly reduce leverage, particularly because the assets are to be sold "at an attractive roughly 10.5x multiple," generating more revenue than expected.

In turn, the leverage reduction should boost the stock price, currently $6.63 per share, over time. This "should be welcome news to investors after the stock's difficult run over the past few weeks (down 8.2% last week and 17.2% in the past month)," Jenkins commented.

The next catalyst for the partnership, Jenkins noted, is stability of Q2/19 earnings.

Raymond James has an Outperform rating on Martin Midstream.


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Disclosures from Raymond James, Martin Midstream Partners L.P., June 10, 2019


Analyst Holdings and Compensation: Equity analysts and their staffs at Raymond James are compensated based on a salary and bonus system. Several factors enter into the bonus determination including quality and performance of research product, the analyst's success in rating stocks versus an industry index, and support effectiveness to trading and the retail and institutional sales forces. Other factors may include but are not limited to: overall ratings from internal (other than investment banking) or external parties and the general productivity and revenue generated in covered stocks.

The analysts Justin Jenkins and J.R. Weston, primarily responsible for the preparation of this research report, attest to the following: (1) that the views and opinions rendered in this research report reflect his or her personal views about the subject companies or issuers and that no part of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views in this research report. In addition, said analyst(s) has not received compensation from any subject company in the last 12 months.

Certain affiliates of the RJ Group expect to receive or intend to seek compensation for investment banking services from all companies under research coverage within the next three months.
Limited Partnerships may generate unrelated business taxable income (UBTI), which can create a tax liability that must be paid from a retirement account. To the extent that Raymond James is your IRA custodian, and there is potential tax liability for UBTI generated by the fund, Raymond James will take the necessary steps to pay the tax from the retirement account by working with a third party to compute the tax liability and prepare the IRS form 990-T for submission to the IRS.
Raymond James & Associates, Inc. makes a market in the shares of Martin Midstream Partners L.P.

Additional Risk and Disclosure information, as well as more information on the Raymond James rating system and suitability categories, is available here.

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