Houston-based Oiltanking Partners (Stock Quote: OILT) is coming out with a new initial public offering this week, and analysts are fairly bullish on OILT's stock.

That's news, as independent storage providers aren't the first option for energy investors looking for the "dynamic duo" of stock market benefits: growth and value.

But with new technologies and increased energy demand for energy in growing middle-class countries like China and India generating a big increase in oil that needs to be stored, particularly in shale-rich areas like West Texas and North Dakota, storage facilities are in high demand.

That's a trend a company like Oiltanking Partners hopes will continue--and it’s putting its money where its mouth is. The Houston-based midstream energy company recently rolled out a new initial public offering designed, in part, to raise enough capital to fill storage facilities in those two regions. In Texas alone (Houston and Beaumont), the company has storage capacity of 17.8 million barrels, with plans to add 12.4 million more barrels worth of additional capacity.

Oiltanking Partners certainly has the pedigree to produce more storage capacity, and with the IPO, now it has the money, too. The company's general partner – Oiltanking Holding Americas--is a subsidiary of Oiltanking GmbH, the second-leading independent oil and gas storage provider on the globe. The new offering, where the company’s stock will be trading on the New York Stock Exchange under the symbol OILT, should raise the $210 million Oiltanking Partners says it needs to raise to meet its long-term operational goals. It hopes to sell 10 million shares of common stock to reach those objectives.

According to a company statement, the shares being offered to the public represent a 25.2% limited partner interest in Oiltanking Partners, or a 29.0% limited partner interest if the underwriters exercise their over-allotment option in full.

Oiltanking Partners: Key Facts
  • Oiltanking is widely viewed as the world's leading independent storage partner for oils, chemicals, and gases. The company owns and operates 71 terminals in 22 countries with a total storage capacity of more than 18.3 million cubic meters.
  • Oiltanking Partners' client list is substantial--and impressive. The list includes private and state oil companies, refiners, petrochemical companies, and traders in petroleum products and chemicals
  • About 75% of Oiltanking Partners' revenue is generated from storage service fees. Clients pay those fees to reserve storage space in its tanks, regardless of whether the customer uses that space or not.

Source: Oiltankingpartners.com

A Hot IPO--And Hot Prospects

Right out of the gate, the July 14 IPO saw Oiltanking Partners' stock climb to $23.87, well ahead of the estimated trading range of $19-$21. While that likely signals a big appetite for Oiltanking Partners' stock, it doesn’t say why.

But a closer look at the company’s financial picture reveals at least three big reasons why the appetite for Oiltanking Partners stock is so big:

Dividends--Oiltanking Partners is a limited partnership, and like most limited partnerships, will shell out its available cash via dividends--a nice perk for investors seeking income in a period of great instability in the financial markets. At its current stock price of $23.80 per share, the company’s dividend yield figures to be about 5.7%, according to a company financial statement.

Strong Ownership, Strong Partner--Oiltanking GmbH is widely viewed as one of the leading energy storage providers in the world. It's a worldwide company, with facilities in Europe, the U.S., Canada, South America, the Middle East, Asia, and India. Analysts expect that Oiltanking's parent company will have a firm grip on the company's finances--a good sign in a volatile energy market. Oiltanking Partners says as much in its prospectus (pages 101 and 102):

We believe that as the indirect owner of our general partner, all of our incentive distribution rights and a 72.8% limited partner interest in us, Oiltanking GmbH will be motivated to promote and support the successful execution of our business plan and to pursue projects that enhance the value of our business.

Good Financials--The company's strong management structure has yielded strong results, with a bottom line inked in black year after year. In Q1 2011, revenues grew by 8%, to $30 million, from the same period in 2010. The company says it earned most of its cash from new storage tanks and pipelines. For 2010, revenues increased by 15%, to $116.5 million, with net income rising by 51%, to $37.8 million. But it’s the storage fees that are Oiltanking's bread-and-butter. 75% of the company's income is derived from such fees, and the new IPO should put the company on a clearer path to more of those fees, especially in the shale sites in Texas and North Dakota.

The oil and gas storage industry is a competitive, but burgeoning one. As far as reaching for a stock that offers both income and growth potential, you could do a lot worse than Oiltanking Partners.

Oiltankers Partners: At a Glance

Oiltanking Partners LP provides integrated terminaling, storage, pipeline, and related services for third-party companies engaged in the production, distribution, and marketing of crude oil, refined petroleum products, and liquefied petroleum gas. The company operates a third-party crude oil and refined petroleum products terminal on the Houston Ship Channel with an aggregate active storage capacity of approximately 12.1 million barrels; and a Beaumont terminal with an aggregate active storage capacity of approximately 5.7 million barrels, which serves as a regional strategic and trading hub for vacuum gas oil and clean petroleum products for refineries located in the upper Gulf Coast region. It provides terminaling services to various customers, including integrated oil companies, marketers, distributors, and chemical and petrochemical companies. OTLP GP LLC serves as the general partner of Oiltanking Partners LP. The company was founded in 2011 and is based in Houston, Texas. Oiltanking Partners LP is a wholly owned subsidiary of Oiltanking Holding Americas Inc.

Source: U.S. Securities and Exchange Commission