Low Gas Prices Boost Global Partners
We’ve been on the lookout for a play on cheap gasoline, and we think we’ve found it, suggests Igor Greenwald, energy expert and editor of The Energy Strategist.
Global Partners (GLP), which traces its origins to a one-truck heating oil delivery service started 81 years ago in Boston by the grandparents of the current CEO, has evolved into a nationwide crude and fuel logistics play.
Following a series of acquisitions in recent years, it now supplies a billion gallons of gasoline annually to more than 1,000 gas stations, including 126 it owns and operates and another 415 leased out or managed on commission.
Sometime in the first quarter of next year, Global Partners expects to close its recently announced acquisition of a filling station and convenience store chain from Warren Equities. At that point, the MLP would be supplying gas to more than 1,500 stations from Maryland to Maine and would own roughly half that total.
If that’s all there was to this story we probably wouldn’t be interested, after all, commodity prices and margins are fickle. If crude were to bounce back to $90 next month, some of the recent gains would almost certainly reverse.
But Global Partners is also a crude and fuel wholesale and logistics business funneling sweet North Dakota crude to the east and west coasts. Global Partners loads oil trains at its two North Dakota terminals to fill that gap and its margin on this wholesale operation expanded 32% year-over-year in the third quarter.
It would have been relatively easy to cobble together a logistics empire like this by running up a big debt or by severely diluting one’s limited partners.