The Daley Note: March 16th, 2023
Midstream company Genesis Energy (GEL) is one of the most vexing to value due to its wide array of businesses. In addition to oil and gas pipelines, GEL operates a fleet of tugs, barges and tankers and runs a soda ash business.
East Daley Analytics covers the company’s many businesses in our GEL Financial Blueprint model. Our Blueprints break down companies by assets, providing historical financials and expected future performance, but do not assess the market risk premium. Nevertheless, two recent transactions help shed light on the potential market value of these unusual GEL operations.
First, Turkey’s Sisecam purchased 60% of Ciner Group’s soda ash business in 4Q21. Now NGL Energy Partners is selling marine transportation assets to Magnolia Marine Transport and Campbell Transportation, providing another data point on these GEL business segments.
NGL Energy Partners (NGL) sold 13 towboats and 25 tank barges to Magnolia and Campbell for $112 million. We do not know how the counterparties split the assets. Like GEL, NGL uses its barges to transport crude oil and refined products along the Gulf Coast intercoastal waterways. The ratio of barges and tow boats is also similar. However, GEL owns a much larger fleet of 42 tow boats and 91 barges. Additionally, GEL owns internally heated barges designed to handle the heavier end of the barrel (asphalt and vacuum gasoil (VGOs)).
The lack of detail around this asset type makes it difficult to assess value. However, knowing historical transaction prices for inland and Jones Act tankers can help frame a reasonable estimate. Using historical transactions involving inland and offshore tow boats and barges, as well as for Jones Act tankers, the implied value could be ~$450 million (refer to the table of comparable historical transactions).
EBITDA from GEL’s Marine Transportation segment has averaged $61 million over the past eight years, although the sector is cyclical based on refinery demand and a prior period of vessel overbuilds. A $450 million value would put GEL’s Marine Transportation cost-to-EBITDA multiple at 7.5x. Admittedly, that value seems high since it would represent nearly one-third of GEL’s total equity market value while generating less than 10% of the company’s 2022 EBITDA. A similar multiple on NGL Energy's marine assets would have put annual EBITDA at about $15 million. – Rob Wilson, CFA Tickers: GEL, NGL.
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