March 14, 2012 [OPIS] - TransMontaigne Partners executives are still waiting for some clarity as to whether, or when, the company's largest shareholder (and General Partner) Morgan Stanley can fund aggressive growth for the logistics company.
Last summer, TransMontaigne CEO Chuck Dunlap told analysts that Morgan Stanley had informed the company that it would not approve any significant funds for acquisitions, thanks to some issues that the investment bank needed to resolve with the Federal Reserve.
Some seven months later, TransMontaigne execs admitted that there had been no change in the “holding pattern” with the bank. The company won’t be making any significant acquisitions under those circumstances, and will concentrate on mostly organic projects and smaller deals.
“It would be best if we didn’t have these constraints,” stated TransMontaigne CEO Chuck Dunlap in an earnings’ conference call today. “But we have to play the hand that we’re dealt.” Management indicated that it had viable options for growth despite the restrictions. The company is a small Master Limited Partnership, so it doesn’t take gigantic projects “to move the dial,” according to chief financial officer Fred Bowden. The company has a very ratable business at its terminals, with 75% of its revenue firmly committed.
A subset of about 92% of that committed revenue runs through terms of one year or more. Top brass have received no indication from Morgan Stanley or government regulators about any timetable for easing restrictions.
As a holding company, Morgan Stanley may be subject to some government stress tests that could impact its funding.
The TransMontaigne partnership did just re-contract with Marathon for a multi-year terminaling contract, and a large deal for Midwestern river terminals will be renegotiated next year. The pricing environment for throughput fees hasn’t changed much, according to CFO Bowden.
The company is looking at several projects whereby it would convert petroleum terminals into facilities that could handle crude oil. At least two river facilities are being reviewed as to whether they could be retrofitted to handle rail transport, or barge offloadings for crude. The rapid development of oil shale plays in the midcontinent could enliven revenue at some otherwise sleepy river terminals.
For now, the company has approved $12 million to $15 million for approved projects, with most of the funding going toward the construction of crude tanks at Cushing, Okla. The storage will generate around $4.3 million in annual revenue, and should come on stream in July 2012.
Fourth-quarter earnings for TransMontaigne, meanwhile, were in line with expectations. Quarterly income came in at $11.5 million compared to a $2.2-million loss in the same quarter a year ago. That loss, however, was mostly tied to a goodwill write-off.
