Phillips 66 And DAPL -- Seeking Alpha -- March 7, 2021

Link here.

Phillips 66. 

DAPL connection.

Meantime, in yet another example of what my followers know I consider a broken MLP model that is heavily skewed in favor of the general partner ("GP"), it appears PSX - the GP of LP Phillips 66 Partners (PSXP) - plans to take advantage of the DAPL pipeline "closing drama" and the severe price weakness in PSXP units, to merge the MLP back into the company (ex-DAPL). 

This will be just awful for PSXP unit-holders, but great for PSX shareholders. 

That is because not only will PSX likely be buying PSXP units at a fire-sale price, but it will be also be adding excellent distributable cash flow back into the company.

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According to the 13-D filing, PSX already owns 74.3% of PSXP's units with 25.7% of the units being held by the public. That equates to 58,580,009 shares PSX would have to roll-up and, at the current $3.50/unit annual distribution (11.4% yield), would be an estimated $205 million annual windfall for PSX shareholders. 

But PSXP unit-holders are going to get hosed on a roll-up if it happens anytime soon, just as higher crude oil production will spur US shale production and will increase volumes through PSXP's pipelines. 

And as I mentioned in my last article on PSXP (see PSXP: My Favorite Mistake Is A BUY), it would appear that the worst-case DAPL outcome (i.e. the pipeline is ordered to be closed) is already more than fully priced into the units. Not to mention closure is not even a given. 

Oh well, another MLP bites the dust.

I can relate to this. Years ago I invested in an MLP. Then Canada changed its tax policy and the GP "closed" the MLP. In the short term, I lost a lot of money (all "virtual" money), but in the long term I'm quite happy how it all worked out.  

And something tells me, I'm going to be even happier before this week is over.