Sunday, March 1, 2015

Adding World Point Terminals LP to investment portfolio

With the explosion of shale oil production in the US one of the problems that has come to the surface is where to store all the oil. Even though the rig count continues to decline it has not resulted in a consummate reduction in US oil production. Oil is beginning to pile up and there are concerns that lack of storage will lead to further price declines.

World Point Terminals (WPT) is a master limited partnership that owns facilities that store crude oil and refined products. They are not concerned with the price of these products they basically just store the products for a fee. The company owns 14.6 million barrels of storage capacity at various locations in the Northeast, Midwest, and Gulf Coast.

The MLP is affiliated with Apex Oil (Apex is the general partner) and has right of first refusal of any Apex asset sales.The MLP recently just acquired a facility in Greensboro, NC under these terms.  The good thing about MLP's is that under the current tax rules they are obligated to pay out the majority of their earnings to shareholders. However they also have some unique possible tax consequences that each person would be wise to investigate before buying shares.

I am adding World Point Terminals to my long term investment portfolio as I am a long term bull on North American energy production. I like the nearly 6% yield and the potential for longer term growth as the MLP adds capacity either through building of its own facilities or acquiring existing facilities. As long as the government of the US will not allow crude oil exports the oil will have to be stored somewhere.

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