Oiltanking Partners Sees Strong Gulf Coast Demand in First-Quarter 2012, Boosts Spending on Houston Terminal

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Researched by Industrial Info Resources (Sugar Land, Texas)--Oiltanking Partners LP (NYSE:OILT) (Houston, Texas), which stores and transports crude oil, refined petroleum products and liquefied petroleum gas, reported steady improvement in first-quarter 2012 as the company boosted storage capacity and continued to see strong demand for transmission and capacity along the Gulf Coast. Net income for the quarter was reported to be $15.94 million, compared with $7.62 million in first-quarter 2011.

Total revenues stood at $34.29 million, a 14.46% increase from the same period last year. The company benefited from an additional 655,000 barrels of storage capacity that began operations in mid-December, increasing throughput volume in the first quarter, as well as higher storage and ancillary service fees. Total storage capacity was reported to be 17.3 million barrels at the end of the quarter, a 2.98% increase from the end of first-quarter 2011, while terminal throughput was reported to be 846.2 million barrels per day, a 2.93% increase.

Industrial Info is tracking more than $1.4 billion in active projects involving companies in the Oiltanking family, including $20 million in additions at a petrochemical terminal in Houston, Texas. The project involves constructing four 250,000-barrel tanks to increase crude oil storage capacity by 1 million barrels of crude oil. The terminal currently holds 12.1 million barrels. The project is expected to be completed in December this year. Oiltanking Partners' board of directors recently approved another $11 million of spending to include a third-party terminal in a pipeline expansion project, sending more crude oil to the company's Houston terminal from the Eagle Ford shale and Mid-Continent area. Last month, Oiltanking announced plans for another $104 million, 3.2 million-barrel expansion at the Houston terminal, to be built on 95 acres near the facility.

In November 2011, the company announced a 1 million-barrel expansion. If the above expansions are completed as planned, total active storage capacity at Oiltanking Partners will be about 22 million barrels by the end of 2013.

"This demand for our assets and services is unprecedented, and we believe, fortunately, that we are in a very strong position to meet this demand," said Carlin Conner, the chairman, president and chief executive officer of Oiltanking Partners, in a conference call. "In this quarter, we have further commercialized our expansive investment-class waterfront, began expanding our pipeline connectivity, and embarked on significant tank expansions."

All three of the company's segments reported higher revenues from fees, with Ancillary Services more than doubling:

• The Storage Services segment reported fee revenues of $24.29 million, an 11.02% increase from first-quarter 2011.
• The Throughput segment reported fee revenues of $6.88 million, a 4.37% increase from the same period last year.
• The Ancillary Services segment reported fee revenues of $3.11 million, compared with $1.48 million in first-quarter 2011.

Capital expenditures are expected to total between $140 million and $150 million for full-year 2012. Throughput levels for second-quarter 2012 are expected to be similar to those in the first quarter.

During the coming years, Oiltanking Partners executives expect to see a stronger demand for crude oil storage by Gulf Coast refineries, oil producers and oil traders. Oiltanking Holding Americas Incorporated, which holds a 71% combined general partner and limited partner interest in Oiltanking Partners, recently announced that one of its subsidiaries, Bulk Handling USA Incorporated (Houston), will acquire full ownership of U.S. United Bulk Terminal LLC, the largest dry bulk export terminal on the Gulf Coast. Oiltanking Holding Americas plans to spend about $70 million during the next two years to increase throughput capacity and improve overall operations at the terminal, which handled more than 11 million tons in 2011. The terminal is currently owned by United Maritime Group LLC.

Conner also noted strong expectations for the company's liquefied petroleum gas export business. "We saw substantial volumes in the first quarter, with increasing export activity forecast for the short- to mid-term," he said in the conference call. "We expect to continue to benefit from the increased capacity of export capabilities at our docks and growing demand for our waterfront service."

For more information, visit Industrial Info's North American Oil & Gas Terminals Project Database and North American Oil & Gas Transmission Project Database.

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