EXHIBIT 99(b)(3)
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Confidential
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PETROLEUM HEAT & POWER CO., INC.
BOARD OF DIRECTORS PRESENTATION
July 24, 1997
Paine Webber Incorporated
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Petroleum Heat & Power Co., Inc.
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TABLE OF CONTENTS
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I SITUATION ANALYSIS
II THE TRANSACTION
III BENEFITS OF THE TRANSACTION
IV ECONOMICS OF THE TRANSACTION
V COMPARABLE MLP ANALYSIS
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Petroleum Heat & Power Co., Inc.
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PART I
SITUATION ANALYSIS
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1
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Petroleum Heat & Power Co., Inc.
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SITUATION ANALYSIS
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HEATING OIL BUSINESS
. Petro remains the dominant force in the heating oil business, selling at
least 3 times as much as its nearest competitor.
. Petro also dominates the acquisition market, acquiring a substantial
share of all heating oil businesses sold.
. While the company has constantly made acquisitions over the last 5
years, higher than expected attrition rates have resulted in little
EBITDA growth.
. Operational changes which were instituted on a small scale in 1996-1997
are expected to reduce the attrition rates over the next several years.
. It is anticipated that the acquisition market will continue to be strong
as more owners approach retirement age and capital gain tax relief
appears in sight.
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2
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Petroleum Heat & Power Co., Inc.
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SITUATION ANALYSIS
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PETRO'S STOCK PERFORMANCE
. Petro's stock has been in a steady decline since 1992.
. Petro's stock was particularly hard hit as a result of the warm winter
of 1996-1997.
. It is difficult to determine what portion of the stock's performance was
related to Petro's financial performance and what portion is
attributable to a lack of research and institutional following and a
lack of comps.
. More importantly, one must question whether or not the operational
improvement which is expected over the next two years will be reflected
in a higher stock price.
. Furthermore, Petro's ability to pursue accretive acquisitions will
continue to be limited by capital constraints.
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Petroleum Heat & Power Co., Inc.
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SITUATION ANALYSIS
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PROPANE BUSINESS
. Large acquisitions have been scarce. Steady stream of mega-acquisitions
(1994-96) as over $1.5 billion of equity capital has been raised from
1992-1996.
. Pricing on all acquisitions has become extremely competitive.
. Multiples for even small deals have expanded.
. Wholesale price spike during the 1996-1997 season revealed another level
of uncertainty, even for those companies (like Star) which profited from
the spike.
. Warm winter in the Northeast compounded the problem for many players.
. The market is starting to question whether propane MLPs are really growth
vehicles.
. The market is also starting to question if the weather is ever normal (it
always seems to be abnormally warm in some section, which more than
offsets good results elsewhere).
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SITUATION ANALYSIS
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STAR'S STOCK PERFORMANCE
. While Star has performed relatively well, it is difficult for the market
to assess how much of the performance was related to inventory gains.
. Star continues to lag behind other MLPs in terms of acquisitions, where
Star's ability to compete is limited.
- Management's limited propane experience limits deal flow
- Geographic concentration limits "blend-in" opportunities
- Larger and better capitalized players competing for the same assets
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PART II
THE TRANSACTION
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6
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THE TRANSACTION
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OVERVIEW
. We believe that a public stock corporation is not the optimal format for
Petro.
- No direct comparables
- Rapid amortization of customer lists results in no earnings
- Perceived limited growth in heating oil industry
- Small capitalization results in limited research coverage
. Furthermore, the leveraged capital structure limits financial flexibility
and growth opportunities.
* AS A RESULT, PETRO'S STOCK HAS NOT PERFORMED WELL AND IS NOT LIKELY TO
ACHIEVE FULL VALUATION EVEN IF OPERATIONS IMPROVE.
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THE TRANSACTION
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IN ORDER TO ADDRESS THESE VALUATION ISSUES, PETRO SHOULD CONSIDER THE
BENEFITS OF AN MLP STRUCTURE WHICH CAN BE ACHIEVED THROUGH A MERGER WITH
STAR GAS
. MLPs typically trade on a yield basis, which currently translates into a
9-10x EBITDA multiple vs a 7-8x multiple historically at Petro.
. The combination of the two companies would result in a sizable MLP
(approximately $300 million implied equity value) which translates into
better valuation and greater liquidity.
. Concurrent with the merger, the issuance of new equity would restructure
and delever the balance sheet.
. The new entity would have substantially better access to capital to fund
future growth.
* THE COMBINED ENTITY WOULD HAVE THE INVESTMENT STORY TO ATTRACT
RESEARCH COVERAGE AND WOULD BENEFIT BOTH PETRO AND STAR GAS SHARE/UNIT
HOLDERS.
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THE TRANSACTION
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THE TRANSACTION INVOLVES TWO SEPARATE STAGES:
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STAGE 1 -- THE EXCHANGE
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PETRO SHAREHOLDERS EXCHANGE THEIR COMMON STOCK FOR STAR GAS MASTER LIMIT
PARTNERSHIP UNITS AT $4.50/SHARE
. Shareholders who hold only Class A shares exchange into Senior
Subordinated MLP units
. Senior Subordinated MLP Units valued at +/- 10% discount to Common
Units
. "Inside" shareholders /(1) /exchange either into Senior Subordinated
MLP Units or Subordinated Units plus the General Partnership Interest
. Senior Subordinated Units offered to "Insiders" will be capped at 3.5
million Petro shares in order to provide adequate coverage to Star
Common Units
. Subordinated Units valued at +/- 20% discount to Common Units
. All Senior Subordinated and Subordinated Units convert to Common Units
after 3 years of "Earn & Pay" of $2.30 (i.e. increase the MQD on the
Common Units)
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_____________________
(1) Insiders for the purposes of this discussion are those individuals
who own Class C and Class A common shares.
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THE TRANSACTION
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THE TRANSACTION INVOLVES TWO SEPARATE STAGES:
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STAGE 2 -- THE RECAPITALIZATION
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APPROXIMATELY $330 MILLION OF PETRO DEBT AND PREFERRED STOCK ARE REFINANCED
. Existing issues will be either redeemed, exchanged, defeased or tendered
for, depending on issue
. Approximately $140 million of new Star equity will be raised through the
sale of Common Units
. Approximately $125 million of new, investment grade debt will be issued
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THE TRANSACTION
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[GRAPH APPEARS HERE]
* PETRO PUBLIC SHAREHOLDERS EXCHANGE FOR SENIOR SUBORDINATED; INSIDERS
EXCHANGE FOR A COMBINATION OF SENIOR SUBORDINATED AND/OR SUBORDINATED +
G.P. UNITS. THE MLP SELLS COMMON UNITS AND USES THE PROCEEDS TO
RECAPITALIZE AND REFINANCE.
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11
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THE TRANSACTION
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STAGE 1 -- THE EXCHANGE
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CURRENT CONSIDERATION RECEIVED
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SHARES UNITS
PETRO SHAREHOLDER TYPE (000'S) TYPE OF MLP INTEREST (000'S)
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Holders of Class A Only 16,355 Senior Subordinated Units 3,520
Holders of Class A and C Shares
Shares Permitted To Be Exchanged
Into Senior Subordinated Units 3,500 Senior Subordinated Units 753
Shares To Be Exchanged Into
Subordinated Units and GP Interest 5,904 Subordinated and General Partner Interest 1,186
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Sub Total 9,404
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TOTAL 25,759 TOTAL 5,459
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STAGE 2 -- THE RECAPITALIZATION
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UNITS OUTSTANDING AT MLP AFTER RECAPITALIZATION (000'S)
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Common Units
Currently Outstanding 2,875
Newly Issued ($139.0 million) 6,046
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Total 8,921
Senior Subordinated Units 4,273
Subordinated Units and GP Interest 1,186
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TOTAL 14,380
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PART III
BENEFITS OF THE TRANSACTION
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BENEFITS TO PETRO SHAREHOLDERS
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. Premium to market.
-- At $4.50 per share, the exchange represents approximately a 50%
premium to market
. Higher valuation multiples.
-- MLPS typically trade at 9-10x EBITDA
. Enhanced growth potential due to greater access to capital.
-- Branding and internal marketing
-- Improved productivity through capital investment
-- Acquisitions
. Lower overall cost of capital.
-- New debt at +/- 8% vs. 12% existing debt
-- Equity capital with limited upside
. Greater size and liquidity.
-- Implied equity market value quadruples to over $300 million
. Greater financial flexibility.
-- Extend maturities through refinancing
-- Improved covenants due to investment grade rating
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Petroleum Heat & Power Co., Inc.
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BENEFITS TO STAR UNITHOLDERS
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DESPITE ATTRACTIVE FINANCIAL PERFORMANCE, STAR TRADES AT A HIGHER YIELD
THAN ITS PEER GROUP. THIS IS DUE TO LACK OF SIZE, GROWTH POTENTIAL, AND
GEOGRAPHIC DIVERSITY. AS A RESULT OF THE TRANSACTIONS, STAR HOLDERS WILL
BENEFIT FROM THE FOLLOWING:
. Increased earnings and distributions.
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FROM TO /(1)/
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Distributable Cash per unit $2.28 $2.84
Distributions per unit $2.20 $2.30
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. Increase MQD to $2.30 per unit.
. Higher total distribution coverage.
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FROM TO /(1)/
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Coverage on Common Units 1.9x 2.0x
Coverage on Total Units 1.0x 1.2x
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. Larger size equity market capitalization.
. Provides vehicle for growth in otherwise stagnant market.
. New identity following aborted sale.
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(1) Based on weather normalized 1997 results as provided by the Company.
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15
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BENEFITS OF THE TRANSACTION
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DISTRIBUTION INCREASE OF SELECTED MLPS SINCE IPO (CURRENT IMPLIED YIELD)/(1)/
[GRAPHS APPEARS HERE]
* INVESTORS HAVE REWARDED INCREASED CASH FLOW WITH ATTRACTIVE VALUATIONS.
__________________
(1) As of 7/22/07.
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BENEFITS OF THE TRANSACTION
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IMPLIED MARKET VALUE OF EQUITY OF SELECTED PROPANE MLPS (CURRENT IMPLIED
YIELD)/(1)/
[GRAPH APPEARS HERE]
* THE LARGER PROPANE MLPS HAVE GREATER MARKET LIQUIDITY AND INVESTOR
AWARENESS AND ARE SUBSEQUENTLY OFTEN REWARDED WITH LOWER YIELDS.
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(1) As of 7/22/97. Implied Market Value of Equity includes all Common,
Subordinated and GP interests.
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BENEFITS OF THE TRANSACTIONS
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PUBLIC UNIT DISTRIBUTION COVERAGE OF SELECTED PROPANE MLPS (CURRENT IMPLIED
YIELD)/(1)/
[GRAPH APPEARS HERE]
* PROPANE MLPS WITH HIGHER DISTRIBUTION COVERAGE PROVIDE INVESTORS WITH
ADDITIONAL SECURITY, RESULTING IN IMPROVED MARKET VALUATIONS.
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(1) As of 7/22/97.
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PART IV
ECONOMICS OF THE TRANSACTION
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TRANSACTION ASSUMPTIONS
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PETROLEUM HEAT & POWER
BASE CARE OPTIMISTIC CARE PESSIMISTIC CARE
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$3.5 Million Maint. CapEx $3.5 Million Maint. CapEx $3.5 Million Maint. CapEx
15-Year Weather 30-Year Weather 15-Year Weather
60% productivity improvement 60% productivity improvement 60% productivity improvement
------------------------------- ------------------------------ -----------------------------
ATTRITION ACQUISITIONS/(1)/ ATTRITION ACQUISITIONS/(1)/ ATTRITION ACQUISITIONS/(1)/
1998 5.0% $15.0 MILLION 4.0% $25.0 MILLION 5.0% $15.0 MILLION
1999 3.5 15.0% 3.0 25.0 4.0 7.5
2000 3.5 22.5 2.0 25.0 4.0 --
2001 1.6 22.5 1.0 25.0 4.0 --
STAR GAS PARTNERS
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ALL CASES
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$2.75 Million in Acquisitions Per Year at 6.5X EBITDA
2% Internal Growth
2.0 Million International Growth CapEx per Year
3.0 Million in Maintenance Growth CapEx per Year
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Scenario 1 Scenario 2
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30 Year Weather 15 Year Weather
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(1) Petro pro forma for the transaction assumes $25.0 million in
acquisitions per year.
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Petroelum Heat & Power Co.,
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ECONOMICS OF THE TRANSACTION
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IMPACT OF TRANSACTION ON CASH DISTRIBUTION AND VALUE TO PETRO SHAREHOLDERS
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BASE CASE OPTIMISTIC CASE PESSIMISTIC CASE
CURRENT/(1)/ PRO FORMA CURRENT/(1)/ PRO FORMA CURRENT/(1)/ PRO FORMA
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1997 $0.30 $ 0.49 $ 0.30 $ 0.63 $0.30 $0.49
1998 - 0.51 - 0.68 - 0.49
1999 - 0.54 - 0.82 - 0.49
2000 - 0.57 - 0.93 - 0.49
2001 - 0.78 - 0.98 - 0.49
Terminal Share Value $7.53 $ 9.45 $11.86 $12.25 $2.60 $5.44
Basis for Terminal Value 8.0x EBITDA 8.25% Yield 8.0x EBITDA 8.0% Yield 7.0x EBITDA 9.0% Yield
Total Future Value $7.92 $12.70 $12.25 $16.78 $2.99 $8.23
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(1) Assumes dividends are cut in order to conserve cash and fund
acquisitions.
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ECONOMICS OF THE TRANSACTION
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EFFECT OF TRANSACTION ON STAR UNITHOLDER DISTRIBUTIONS AND UNIT VALUE -- BASE
CASE
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CURRENT DISTRIBUTABLE CASH
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ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
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Earned $ 1.95 $ 2.28 $ 2.09 $ 2.19 $ 2.30 $ 2.42
Paid 2.20 2.20 2.20 2.20 2.30 2.40
Yield 10.0% 10.0% 10.0% 9.5% 9.0% 9.0%
Unit Value $22.00 $22.00 $22.00 $23.16 $25.56 $26.67
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PRO FORMA DISTRIBUTABLE CASH
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ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
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Earned $ 2.17 $ 2.84 $ 2.64 $ 2.92 $ 3.12 $ 3.24
Paid 2.30 2.30 2.40 2.50 2.60 2.70
Yield 10.0% 10.0% 10.0% 9.0% 8.0% 7.5%
Unit Value $22.00 $23.00 $24.00 $26.32 $32.50 $36.00
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ECONOMICS OF THE TRANSACTION
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EFFECT OF TRANSACTION ON STAR UNITHOLDER DISTRIBUTIONS AND UNIT VALUE --
BASE CASE
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CURRENT DISTRIBUTABLE CASH
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ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
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Earned $ 1.95 $ 2.28 $ 2.38 $ 2.50 $ 2.63 $ 2.77
Paid 2.20 2.20 2.38 2.49 2.60 2.72
Yield 10.0% 10.0% 10.0% 9.5% 9.0% 8.5%
Unit Value $22.00 $22.00 $23.80 $26.21 $28.89 $32.00
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PRO FORMA DISTRIBUTABLE CASH
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ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
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Earned $ 2.17 $ 2.84 $ 2.98 $ 3.36 $ 3.63 $ 3.77
Paid 2.30 2.30 2.85 3.04 3.18 3.25
Yield 10.0% 10.0% 10.0% 9.0% 8.0% 8.0%
Unit Value $23.00 $23.00 $28.50 $33.78 $39.75 $40.63
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ECONOMICS OF THE TRANSACTION
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EFFECT OF TRANSACTION ON STAR UNITHOLDER DISTRIBUTIONS AND UNIT VALUE --
PESSIMISTIC CASE
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CURRENT DISTRIBUTABLE CASH
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ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
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Earned $ 1.95 $ 2.28 $ 2.09 $ 2.19 $ 2.30 $ 2.42
Paid 2.20 2.20 2.20 2.20 2.20 2.20
Yield 10.0% 10.0% 10.0% 9.5% 9.0% 9.0%
Unit Value $ 22.00 $ 22.00 $ 22.00 $23.16 $24.44 $24.44
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PRO FORMA DISTRIBUTABLE CASH
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ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
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Earned $ 2.17 $ 2.84 $ 2.64 $ 2.87 $ 2.90 $ 2.61
Paid 2.30 2.30 2.30 2.30 2.30 2.30
Yield 10.0% 10.0% 10.0% 9.5% 9.0% 9.0%
Unit Value $ 23.00 $ 23.00 $ 23.00 $24.21 $25.56 $ 25.56
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ECONOMICS OF THE TRANSACTION
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EFFECT OF THE TRANSACTION ON STAR UNIT COVERAGE -- BASE CASE
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CURRENT COVERAGE
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ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
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Coverage on Common Units 1.7x 1.9x 1.8x 1.9x 2.0x 2.1x
Coverage on Total Units 0.9 1.0 1.0 1.0 1.0 1.1
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PRO FORMA COVERAGE/(1)/
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ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
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Coverage on Common Units 1.5x 2.0x 1.9x 2.1x 2.2x 2.3x
Coverage on Total Units 0.9 1.2 1.2 1.3 1.4 1.4
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________________________________
/(1)/ Based on $2.30 minimum quarterly distribution.
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ECONOMICS OF THE TRANSACTION
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EFFECT OF TRANSACTION ON STAR UNIT COVERAGE -- OPTIMISTIC CASE
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CURRENT COVERAGE
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ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
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Coverage on Common Units 1.7x 1.9x 2.0x 2.1x 2.2x 2.4x
Coverage on Total Units 0.9 1.0 1.1 1.1 1.2 1.3
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PRO FORMA COVERAGE /(1)/
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ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
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Coverage on Common Units 1.5x 2.0x 2.1x 2.4x 2.5x 2.6x
Coverage on Total Units 0.9 1.2 1.3 1.5 1.6 1.6
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____________________________
(1) Based on $2.30 minimum quarterly distribution.
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ECONOMICS OF THE TRANSACTION
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EFFECT OF TRANSACTION ON STAR UNIT COVERAGE -- OPTIMISTIC CASE
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CURRENT COVERAGE
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ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
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Coverage on Common Units 1.7x 1.9x 1.8x 1.9x 2.0x 2.1x
Coverage on Total Units 0.9 1.0 1.0 1.0 1.0 1.1
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PRO FORMA COVERAGE /(1)/
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ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
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Coverage on Common Units 1.5x 2.0x 1.9x 2.0x 2.0x 1.9x
Coverage on Total Units 0.9 1.2 1.2 1.3 1.3 1.1
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(1) Based on $2.30 minimum quarterly distribution.
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PART V
COMPARABLE MLP ANALYSIS
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COMPARABLE MLP ANALYSIS
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COMPARATIVE ANALYSIS OF SELECTED MLPS
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($ in millions, except per share data) MARKET IMPLIED
VALUE OF MARKET IMPLIED INDICATED
CLOSING PUBLIC VALUE OF MARKET DISTRIBUTION IMPLIED
COMPANY 22-JUL-97 EQUITY EQUITY/(1)/ CAPITALIZATION/(2)/ PER UNIT YIELD/(3)/
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PIPELINES
Buckeye Partners/(4)/ $49.13 $592.8 $ 598.8 $ 823.9 $3.52 7.2%
Kinder Morgan Energy Partners/(5)/ 62.13 404.4 412.7 564.5 4.00 6.4
EOTT Energy Partners 18.88 188.8 362.7 442.9 1.90 10.1
Genesis Energy/(6)/ 20.38 175.7 224.1 212.6 2.00 9.8
Kaneb Pipe Line Partners 358.3 489.9 627.9
Senior Preference Units 30.63 2.40 7.8
Preference Units 29.31 2.40 8.2
Lakehead Pipeline Partners/(7)/ 41.88 841.3 1,025.6 1,445.2 3.12 7.5
Leviathan Gas Pipeline Partners/(8)/ 25.06 453.0 623.2 848.4 1.80 7.2
Northern Border Partners/(9)/ 29.94 592.2 800.4 1,295.8 2.20 7.3
Santa Fe Pacific Pipeline Partners 40.38 773.1 788.9 1,166.9 3.00 7.4
TEPPCO Partners/(10)/ 49.00 710.5 728.8 1,022.4 3.20 6.5
PIPELINE MEAN $2.69 7.8%
PIPELINE MEDIAN 2.40 7.4
PROPANE
AmeriGas Partners $25.69 $566.7 $1,096.8 $1,823.7 $2.20 8.6%
Cornerstone Propane Partners/(11)/ 22.50 221.0 377.0 608.7 2.16 9.6
Ferrellgas Partners/(12)/ 22.69 331.5 745.1 1,220.0 2.00 8.8
Heritage Propane Partners 22.75 97.5 185.4 324.4 2.00 8.8
National Propane Partners $20.38 $136.5 $ 233.6 $ 358.8 $2.10 10.3%
Star Gas Partners 22.50 64.7 121.0 207.5 2.20 9.8
Suburban Propane Partners 19.25 415.1 564.2 1,106.7 2.00 10.4
PROPANE MEAN $2.09 9.5%
PROPANE MEDIAN 2.10 9.6
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COMPARATIVE ANALYSIS OF SELECTED MLPS
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($ in millions, except per share data) LTM DISTRIBUTABLE CASH FLOW/ LTM DISTRIBUTABLE CASH FLOW/
---------------------------- ----------------------------
INDICATED INDICATED LTM LTM
DISTRIBUTION DISTRIBUTION DISTRIBUTION DISTRIBUTION
COMPANY TO PUBLIC UNITS TO TOTAL UNITS TO PUBLIC UNITS TO TOTAL UNITS
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PIPELINES
Buckeye Partners/(4)/ 1.1x 1.0x 1.2x 1.2x
Kinder Morgan Energy Partners/(5)/ 0.5 0.5 0.8 0.8
EOTT Energy Partners 2.0 1.1 2.0 1.1
Genesis Energy/(6)/ 1.2 1.0 NM NM
Kaneb Pipe Line Partners
Senior Preference Units 2.5 1.1 2.6 1.1
Preference Units 1.5 1.1 1.6 1.1
Lakehead Pipeline Partners/(7)/ 1.6 1.3 1.9 1.6
Leviathan Gas Pipeline Partners/(8)/ 2.3 1.7 2.8 2.1
Northern Border Partners/(9)/ 1.8 1.3 1.8 1.3
Santa Fe Pacific Pipeline Partners 1.4 1.4 1.4 1.4
TEPPCO Partners/(10)/ 1.3 1.2 1.4 1.3
PIPELINE MEAN 1.6X 1.2X 1.7X 1.3X
PIPELINE MEDIAN 1.5 1.1 1.7 1.3
PROPANE
AmeriGas Partners 1.6x 0.8x 1.6x 0.8x
Cornerstone Propane Partners/(11)/ 1.2 0.7 NM NM
Ferrellgas Partners/(12)/ 1.8 0.8 1.8 0.8
Heritage Propane Partners 1.5 0.8 1.6 0.8
National Propane Partners 0.7x 0.4x 0.7x 0.4x
Star Gas Partners 1.6 0.9 1.6 0.9
Suburban Propane Partners 0.7 0.5 0.7 0.5
PROPANE MEAN 1.3X 0.7X 1.3X 0.7X
PROPANE MEDIAN 1.5 0.8 1.6 0.8
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COMPARATIVE ANALYSIS OF SELECTED MLPS
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($ in millions, except per share data)
LTD/MARKET EBITDA/ MARKET CAP/
COMPANY CAPITALIZATION INTEREST EXP. EBITDA
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PIPELINES
Buckeye Partners/(4)/ 24.0% 3.7x 10.1x
Kinder Morgan Energy Partners/(5)/ 28.4 2.6 16.8
EOTT Energy Partners 0.0 11.6 9.2
Genesis Energy/(6)/ 0.0 NM 8.9
Kaneb Pipe Line Partners 22.1 5.6 10.0
Senior Preference Units
Preference Units
Lakehead Pipeline Partners/(7)/ 32.0 3.9 9.9
Leviathan Gas Pipeline Partners/(8)/ 25.8 NM 10.2
Northern Border Partners/(9)/ 25.9 3.7 10.7
Santa Fe Pacific Pipeline Partners 30.4 3.6 8.8
TEPPCO Partners/(10)/ 30.3 3.1 9.8
PIPELINE MEAN 21.9% 4.8X 10.5X
PIPELINE MEDIAN 25.8 3.7 9.9
PROPANE
AmeriGas Partners 37.7% 2.4x 11.8x
Cornerstone Propane Partners/(11)/ 38.2 2.7 18.4
Ferrellgas Partners/(12)/ 37.6 2.5 10.6
Heritage Propane Partners 41.2 2.3 11.9
National Propane Partners 35.7% 2.0x 14.0x
Star Gas Partners 41.0 2.9 10.4
Suburban Propane Partners 38.7 2.7 12.3
PROPANE MEAN 38.6% 2.5X 12.8X
PROPANE MEDIAN 38.2 2.5 11.9
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____________________
(1) Implied Market Value of Equity implies value of total equity based on
value of public units.
(2) Implied Market Capitalization equals Implied Market Value of Equity
plus net debt and other long-term liabilities.
(3) Based on most recent distribution declared on an annualized basis.
(4) Indicated Distribution per Unit reflects a Quarterly Distribution of
$0.88 as proposed by the General Partner on June 24, 1997. The
increased distribution is subject to approval by the G.P.'s Board of
Directors and will be paid August 1997 to unitholders of record on
June 16, 1997.
(5) Pro forma for the expected distribution increase from $0.63 per unit
per quarter to $1.00 per unit.
(6) Pro forma for the public offering of 7,500,000 Common Units.
(7) Indicated Distribution per Unit reflects an increased Quarterly
Distribution of $0.78 as announced on July 17, 1997. The Increased
distribution is payable August 14, 1997, to unitholders of record on
July 31, 1997.
(8) Indicated Distribution per Unit reflects an increased Quarterly
Distribution of $0.45 as announced on July 21, 1997. The Increased
distribution is payable August 14, 1997, to unitholders of record on
July 31, 1997.
(9) Distributable Cash Flow is based upon income statement items adjusted
for approximate 30% minority interest.
(10) Indicated Distribution per Unit reflects a Quarterly Distribution of
$0.80 as announced by the General Partner on July 14, 1997. The
increased distribution is payable August 8, 1997 to unitholders of
record on July 31, 1997.
(11) Pro forma for the initial public offering of 9,821,000 limited partner
units and the private placement of $220 million of Senior Secured
Notes.
(12) Pro forma for the $90 million acquisition of Skelgas on April 30,
1996.
________________________________________________________________________________
29
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
COMPARABLE MLP ANALYSIS
----------------------------------------------------------------------------------------------------------------
DIVERSIFIED MLPS
------------------------------------------------------------------------------------------------------------
IMPLIED MARKET
DIVERSIFIED IMPLIED VALUE OF EQUITY LTM DISTRIBUTION COVERAGE
---------------------------
LINES OF BUSINESS YIELD /(1)/ (MILLIONS) COMMON UNITS TOTAL UNITS
------------------------------------------------------------------------------------------------------------
Genesis Energy Crude pipeline 9.8% $224.1 1.2x 1.0x
Crude marketing
Kaneb Pipe Line Products pipeline 8.2% $489.9 1.5 1.1
Storage terminals
Kinder Morgan Products pipeline 6.4% $412.7 0.8 0.8
Coal storage
Coal transfer
NGL fractionation
Gas processing
Leviathan Gas Pipeline Gas pipeline 7.2% $623.2 2.3 1.7
Crude pipeline
Oil & gas production
------------------------------------------------------------------------------------------------------------
_____________________
(1) As of 7/22/97.
- --------------------------------------------------------------------------------
30
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
STEPS OF THE TRANSACTION AND TAX IMPLICATIONS
---------------------------------------------------------------------------
31
- --------------------------------------------------------------------------------
Petroleum Heat & Power Co., Inc.
- --------------------------------------------------------------------------------
STEPS OF THE TRANSACTION AND TAX IMPLICATIONS
-----------------------------------------------------------------------------
STEPS OF THE TRANSACTION
. STEP ONE: Star Gas Corp. merges into Petro. Petro obtains from Star Gas
--------
Corp. the GP units of MLP and OLP and MLP subordinated units. Petro
transfers the GP units to an LLC. The subordinated units are designated
Senior Subordinated Units.
. STEP TWO: Petro transfers assets to MLP in exchange for additional Senior
--------
Subordinated Units so as to have a total number of Senior Subordinated
Units equal in value to the value of the Petro Class A Common Stock held
by the public.
. STEP THREE: Petro exchanges all LLC shares for an equivalent value of
----------
Class C shares held by Petro insiders.
. STEP FOUR: The Petro insiders transfer their remaining Class A and Class C
---------
Stock to the MLP in exchange for Junior Subordinated Units.
. STEP FIVE: OLP organized Newco. MLP transfers to OLP and OLP transfer to
---------
Newco, all Petro shares owned by the MLP, as acquired by MLP from the
Petro insiders.
. STEP SIX: Newco merges with and into Petro. Class A Shares owned by the
--------
public are changed into Senior Subordinated Units. Class A and Class C
shares owned by Newco are canceled. Newco shares owned by OLP are changed
into Class A Petro shares.
CORRESPONDING TAX IMPLICATION
. Tax free.
. Tax free.
. This triggers tax at Petro measured by the value of the LLC shares in
excess of Petro's basis in them and tax at the Petro insider level
measured by the value of the LLC shares in excess of their basis in the
Petro shares surrendered.
. Tax free.
. Tax free.
. This step is tax free to Newco and OLP. Petro will recognize gain equal to
the value of the Senior Subordinated Units in excess of Petro's basis in
them. The public shareholders will recognize gain (or loss) measured by
the excess (or deficit) in value of the Senior Subordinated Units as
compared to their basis in the Petro Class A Common Stock.
-----------------------------------------------------------------------------
32
EXHIBIT 99(B)(4)
- --------------------------------------------------------------------------------
Confidential
- --------------------------------------------------------------------------------
STAR GAS PARTNERS, L.P.
BOARD OF DIRECTORS PRESENTATION
January 26, 1998
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
---------------------------------------------------------------------------
I SITUATION ANALYSIS
II PETRO'S STRATEGY
III THE TRANSACTION
IV BENEFITS OF THE TRANSACTION
V ECONOMICS OF THE TRANSACTION
VI COMPARABLE MLP ANALYSIS
Exhibit I Steps of the Transaction and Tax Implications
---------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
PART I
SITUATION ANALYSIS
---------------------------------------------------------------------------
1
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
SITUATION ANALYSIS
---------------------------------------------------------------------------
PROPANE BUSINESS
. Pricing on all acquisitions has become extremely competitive as over $1.5
billion of equity has come into the industry since 1994.
. Large acquisitions have been scarce and multiples for even small deals
have expanded.
. Wholesale price spike during the 1996-1997 season revealed another level
of uncertainty, even for those companies (like Star) which profited from
the spike.
. Warm winter in the Northeast compounded the problem for many players.
. The market is starting to question whether propane MLPs are really growth
vehicles, as many have failed to demonstrate internal growth.
. The market is also starting to question if the weather is ever normal (it
always seems to be abnormally warm in some section, which more than
offsets good results elsewhere).
---------------------------------------------------------------------------
2
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
SITUATION ANALYSIS
---------------------------------------------------------------------------
IN SPITE OF SOLID PERFORMANCE AND THE RECENT PEARL ACQUISITION, STAR HAS
BEEN UNABLE TO IMPROVE ITS VALUATION RELATIVE TO OTHER MLPs
STAR GAS YIELD
[GRAPH APPEARS HERE]
________________________
(1) Index is a composite of APU, CNO, FGP, HPG, NPL and SPH.
---------------------------------------------------------------------------
3
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
SITUATION ANALYSIS
---------------------------------------------------------------------------
CURRENT LTM COVERAGES ON TOTAL UNITS
[GRAPH APPEARS HERE]
CURRENT YIELDS
[GRAPH APPEARS HERE]
* ONLY NATIONAL PROPANE AND SUBURBAN -- WHICH ARE HAVING OPERATIONAL
PROBLEMS -- TRADE AT A HIGHER YIELD THAN STAR.
__________________
(1) As of 1/23/98.
---------------------------------------------------------------------------
4
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
SITUATION ANALYSIS
---------------------------------------------------------------------------
IMPLIED MARKET VALUE OF EQUITY OF SELECTED PROPANE MLPS (CURRENT IMPLIED
YIELD) /(1)/
[GRAPH APPEARS HERE]
* THE LARGER PROPANE MLPS HAVE GREATER MARKET LIQUIDITY AND INVESTOR
AWARENESS AND ARE SUBSEQUENTLY OFTEN REWARDED WITH LOWER YIELDS.
* AMERIGAS AND STAR HAVE COMPARABLE COVERAGES, BUT AMERIGAS TRADES AT A
100 B.P. PREMIUM - PRIMARILY DUE TO SIZE.
____________________
(1) As of 1/23/98. Implied Market Value of Equity includes all Common,
Subordinated and GP interests.
---------------------------------------------------------------------------
5
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
SITUATION ANALYSIS
---------------------------------------------------------------------------
STAR CONTINUES TO LAG BEHIND OTHER MLPS IN TERMS OF ACQUISITIONS, WHERE
STAR'S ABILITY TO COMPETE IS LIMITED
. Management's limited propane experience lowers deal flow
. Geographic concentration limits "blend-in" opportunities
. Larger and better capitalized players compete for the same assets
---------------------------------------------------------------------------
6
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
SITUATION ANALYSIS
---------------------------------------------------------------------------
SINCE GOING PUBLIC, MOST PROPANE MLPS HAVE MADE ACQUISITIONS AT A
DISAPPOINTING PACE
PERCENTAGE GALLONS ACQUIRED AS A % OF ORIGINAL GALLONS/(1)/
[GRAPH APPEARS HERE]
* INVESTORS HAVE RESPONDED FAVORABLY TO ACQUISITION OPPORTUNITIES. THE
ENTITIES WHICH HAVE GROWN THE MOST ON A PERCENTAGE BASIS (FGP AND HPG)
TRADE AT PREMIUM MULTIPLES.
____________
(1) As of 1/23/98.
---------------------------------------------------------------------------
7
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
SITUATION ANALYSIS
-------------------------------------------------------------------------
HEATING OIL BUSINESS
. Petro remains the dominant force in the heating oil business, selling at
least 3 times as much as its nearest competitor.
. Petro also dominates the acquisition market, acquiring a substantial
share of all heating oil businesses sold.
. While the company has constantly made acquisitions over the last 5
years, higher than expected attrition rates have resulted in little
EBITDA growth.
. Operational changes which were instituted on a small scale in 1996-1997
are expected to reduce the attrition rates over the next several years.
. It is anticipated that the acquisition market will continue to be strong
as more owners approach retirement age and capital gain tax relief
appears in sight.
---------------------------------------------------------------------------
8
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
PART II
PETRO'S STRATEGY
---------------------------------------------------------------------------
9
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
PETRO'S STRATEGY
---------------------------------------------------------------------------
PETRO WILL TAKE ADVANTAGE OF FAVORABLE CONDITIONS IN THE HEATING OIL MARKET
. Significant competitive advantages.
-- Industry is populated by thousands of relatively small local family
owned businesses
-- Higher concentration of customers than in the propane industry
creates critical mass
-- Sufficient financial resources to make key strategic acquisitions
-- Management openness and ability to modify historical operating
practices
. Consumer attitudes facilitate creation of a brand image.
-- Utility product that is delivered without affirmative purchase
decision
-- 92% of customers do not know competitor's prices
-- 35% of consumers do not know the name of another heating oil
company
-- Only 34% know the name of only one other company (no one specific
competitor)
. Unique size provides significant opportunities.
-- Engage professional management and achieve efficient organizational
structure
-- Enhance MIS and communication technology
-- Operating and marketing efficiencies
---------------------------------------------------------------------------
10
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
PETRO'S STRATEGY
---------------------------------------------------------------------------
ANTICIPATED BENEFITS FROM STRATEGY
. Reduced operating costs and increased profitability.
. Growth through internal marketing.
. Attract new customers.
. Retain existing customers.
. Improve products and services.
---------------------------------------------------------------------------
11
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
PETRO'S STRATEGY
---------------------------------------------------------------------------
BY CREATING A BRAND IMAGE, PETRO CAN TARGET A NEW CUSTOMER BASE
. Consumers moving into oil heated homes.
. Other fuel oil dealers' dissatisfied customers.
-- Represents 8% to 10% of market
. Customers of other nationally branded companies offering home delivered
products and services.
-- HFS real estate family of companies (Century 21, ERA, Coldwell
Banker)
-- Security systems
-- Bottled water
-- Extermination
-- Electricity
-- Lawn care
* CREATING A BRAND IMAGE WOULD PROVIDE PETRO THE OPPORTUNITY TO FILL THE
VOID IN THE INDUSTRY BY BECOMING THE ONLY CONSUMER-RECOGNIZABLE HEATING
OIL COMPANY.
---------------------------------------------------------------------------
12
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
PETRO'S STRATEGY
---------------------------------------------------------------------------
IMPROVE EXISTING CUSTOMER RETENTION
. Improve product thereby increasing customer satisfaction and reducing
triggering events.
-- Reduce oil runouts
-- Reduce incomplete and repeat equipment repairs
-- Provide unique on-time repairs
. All employees function as salesmen.
. Segmented and unbundled pricing.
. Create deeper customer relationships.
---------------------------------------------------------------------------
13
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
PETRO'S STRATEGY
---------------------------------------------------------------------------
CREATE SEGMENTED AND UNBUNDLED PRICING
. Heating equipment repair and maintenance revenues lower than cost.
-- Bundled with and subsidized by oil price
. Unlimited annual service contracts.
. Tailor unbundled pricing packages for different customer segments.
-- Shift charges away from more visible oil to less sensitive equipment
repair
-- Replace unlimited service contracts with co-pay program based on
usage
---------------------------------------------------------------------------
14
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
PETRO'S STRATEGY
---------------------------------------------------------------------------
CREATE DEEPER CUSTOMER RELATIONSHIPS
. Offer rationally related products requiring similar operating expertise.
-- Air conditioning
-- Electric repair
-- Plumbing
. Create affinity group buying benefits with cross marketing partners.
-- Security systems
-- Bottled water
-- Extermination
-- Electricity
-- Lawn care
---------------------------------------------------------------------------
15
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
Part III
THE TRANSACTION
---------------------------------------------------------------------------
16
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
THE TRANSACTION
--------------------------------------------------------------------------
OVERVIEW
. Star's limited size relative to other comparable MLPs restricts both
its financial flexibility and access to strategic acquisitions.
. We believe that a public stock corporation is not the optimal format
for Petro.
__ No direct comparables
__ Rapid amortization of customer lists results in no earnings
__ Perceived limited growth in heating oil industry
__ Small capitalization results in limited research coverage
. Furthermore, Petro's leveraged capital structure also limits its
financial flexibility and growth opportunities.
* AS A RESULT, STAR GAS TRADES AT A SLIGHT DISCOUNT TO ITS PEERS, WHILE
PETRO'S STOCK HAS PERFORMED POORLY AND IS NOT LIKELY TO ACHIEVE FULL
VALUATION EVEN IF OPERATIONS IMPROVE.
--------------------------------------------------------------------------
17
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
THE TRANSACTION
--------------------------------------------------------------------------
IN ORDER TO ADDRESS THESE VALUATION ISSUES, STAR GAS SHOULD CONSIDER THE
BENEFITS OF A MERGER WITH PETRO
. The combination of the two companies would result in a sizable MLP
(approximately $325 million implied equity value) which translates
into better valuation and greater liquidity.
. The new entity would have substantially better access to capital to
fund future growth.
. Concurrent with the merger, the issuance of new equity would
restructure and delever the balance sheet.
. The restructuring would be accretive to distributable cash flow.
* THE COMBINED ENTITY WOULD HAVE THE INVESTMENT STORY TO ATTRACT
RESEARCH COVERAGE AND WOULD BENEFIT BOTH STAR GAS AND PETRO SHARE/UNIT
HOLDERS.
--------------------------------------------------------------------------
18
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
THE TRANSACTION
--------------------------------------------------------------------------
CERTAIN FACTORS MUST BE INHERENT TO THE TRANSACTION IN ORDER FOR THE MERGER
TO BE ATTRACTIVE TO STAR UNITHOLDERS
. The transaction must be substantially accretive to Star Unitholders
based on current operations.
. Petro shareholders must be subordinate to existing Star Unitholders.
. The indicated distribution and Minimum Quarterly Distribution ("MQD")
must be increased from their current levels.
--------------------------------------------------------------------------
19
- -------------------------------------------------------------------------------
Star Gas Partners L.P.
- -------------------------------------------------------------------------------
THE TRANSACTION
--------------------------------------------------------------------------
THE TRANSACTIN INVOLVES TWO SEPARATE STAGES:
--------------------------------------------------------------------------
STAGE 1-- THE EXCHANGE
--------------------------------------------------------------------------
PETRO SHAREHOLDERS EXCHANGE THEIR COMMON STOCK FOR STAR GAS MASTER LIMIT
PARTNERSHIP UNITS AT $3.15/SHARE
. Shareholders who hold only Class A shares exchange into Senior
Subordinated MLP units.
. Senior Subordinated MLP Units valued at + 10% discount to Common
Units.
. "Inside" shareholders /(1) /exchange either into Senior Subordinated
MLP Units or Subordinated Units plus the General Partnership Interest.
. Senior Subordinated Units offered to "Insiders" will be capped at 3.5
million Petro shares in order to provide adequate coverage to Star
Common Units.
. Subordinated Units valued at + 20% discount to Common Units.
. All Senior Subordinated and Subordinated Units convert to Common Units
after 3 years of "Earn & Pay" of $2.30 (i.e. increase the MQD on the
Common Units).
--------------------------------------------------------------------------
___________________
(1) Insiders for the purposes of this dicussion are those individuals who
own Class C and Class A common shares.
--------------------------------------------------------------------------
20
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
THE TRANSACTION
--------------------------------------------------------------------------
THE TRANSACTION INVOLVES TWO SEPARATE STAGES:
--------------------------------------------------------------------------
STAGE 2 -- THE RECAPITALIZATION
--------------------------------------------------------------------------
APPROXIMATELY $320 MILLION OF PETRO DEBT AND PREFERRED STOCK ARE REFINANCED
. Existing issues will be either redeemed, exchanged, defeased or
tendered for, depending on issue.
. Approximately $140 million of new Star equity will be raised through
the sale of Common Units.
. Approximately $125 million of new debt will be issued.
--------------------------------------------------------------------------
--------------------------------------------------------------------------
21
- --------------------------------------------------------------------------------
STAR GAS PARTNERS, L.P
- --------------------------------------------------------------------------------
THE TRANSACTION
---------------------------------------------------------------------------
[GRAPH APPEARS HERE]
* PETRO PUBLIC SHAREHOLDERS EXCHANGE FOR SENIOR SUBORDINATED; INSIDERS
EXCHANGE FOR A COMBINATION OF SENIOR SUBORDINATED AND/OR SUBORDINATED +
G.P. UNITS. THE MLP SELLS COMMON UNITS AND USES THE PROCEEDS TO
RECAPITALIZE AND REFINANCE.
---------------------------------------------------------------------------
22
- --------------------------------------------------------------------------------
STAR GAS PARTNERS, L.P
- --------------------------------------------------------------------------------
THE TRANSACTION
---------------------------------------------------------------------------
STAGE 1 -- THE EXCHANGE
CURRENT CONSIDERATION RECEIVED
-------------------------------------------------------- ----------------------------------------------------------
SHARES UNITS
PETRO SHAREHOLDER TYPE (000'S) TYPE OF MLP INTEREST (000'S)
Holders of Class A Only 16,355 Senior Subordinated Units 2,464
Holders of Class A and C Shares
Shares Permitted To Be Exchanged
Into Senior Subordinated Units 3,500 Senior Subordinated Units 527
Shares To Be Exchanged Into
Subordinated Units and GP Interest 5,904 Subordinated and General Partner Interest 1,296
------ -----
Sub Total 9,404
------
TOTAL 25,759 TOTAL 4,287
-------------------------------------------------------- ----------------------------------------------------------
STAGE 2 -- THE RECAPITALIZATION
- --------------------------------------------------------------------------------
--------------------------------------------------------------------------------
UNITS OUTSTANDING AT MLP AFTER RECAPITALIZATION (000'S)
--------------------------------------------------------------------------------
Common Units
Currently Outstanding 3,832
Newly Issued ($137.6 million) 6,116
------
Total 9,947
Senior Subordinated Units 2,991
Subordinated Units and GP Interest 1,296
------
TOTAL 14,234
--------------------------------------------------------------------------------
---------------------------------------------------------------------------
23
- --------------------------------------------------------------------------------
STAR GAS PARTNERS, L.P
- --------------------------------------------------------------------------------
PART IV
BENEFITS OF THE TRANSACTION
---------------------------------------------------------------------------
24
- --------------------------------------------------------------------------------
STAR GAS PARTNERS, L.P
- --------------------------------------------------------------------------------
BENEFITS OF THE TRANSACTION
---------------------------------------------------------------------------
AS A RESULT OF THE TRANSACTIONS, STAR HOLDERS WILL BENEFIT FROM THE
FOLLOWING:
. Increased earnings and distributions.
1997
------------------------------------------------------
ACTUAL NORMALIZED 1998 (1)
------------------------------------------------------ ------------------------
FROM TO FROM TO FROM TO
----------------------------------------------------------------------------------------------------------------------------
Distributable Cash per unit $2.06 $2.19 $2.06 $2.65 $2.27 $2.93
Distributions per unit $2.20 $2.30 $2.20 $2.30 $2.20 $2.30
----------------------------------------------------------------------------------------------------------------------------
. Increase MQD to $2.30 per unit.
. Higher total distribution coverage.
1997
------------------------------------------------------
ACTUAL NORMALIZED 1998 /(1)/
------------------------------------------------------ ----------------------------
From TO FROM TO FROM TO
------------------------------------------------------------------------------------------- ----------------------------
Coverage on Common Units 1.6x 1.4x 1.6x 1.7x 1.7x 1.9x
Coverage on Total Units 0.9x 1.0x 0.9x 1.2x 1.0x 1.3x
----------------------------------------------------------------------------------------------------------------------------
. Larger size equity market capitalization.
. A vehicle for growth in otherwise stagnant market.
___________________
(1) Based on projected 1998 results. Assumes annually MQD of $2.20
---------------------------------------------------------------------------
25
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
BENEFITS OF THE TRANSACTION
--------------------------------------------------------------------------
CHANGE IN DISTRIBUTIONS OF SELECTED MLPS SINCE IPO /(1)/
[GRAPH APPEARS HERE]
* INVESTORS HAVE REWARDED INCREASED DISTRIBUTIONS WITH ATTRACTIVE
VALUATIONS.
______________________
(1) As of 1/23/98.
--------------------------------------------------------------------------
26
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
BENEFITS OF THE TRANSACTION
--------------------------------------------------------------------------
A MERGER WITH PETRO WILL RESPOND TO SEVERAL IMPORTANT INVESTOR ISSUES
--------------------------------------------------------------------------
Q: How will the market value the mixed MLP?
A: Growth and ability to make distributions are the key considerations for
valuing an MLP. The merger provides the size, business mix and
flexibility that investors are seeking. Several diversified MLPs exist
and perform favorably compared to their peers.
--------------------------------------------------------------------------
DIVERSIFIED MLPS
--------------------------------------------------------------------------
IMPLIED MARKET VALUE
DIVERSIFIED IMPLIED OF EQUITY LTM DISTRIBUTION COVERAGE
-----------------------------
LINES OF BUSINESS YIELD /(1)/ (MILLIONS) /(1)/ COMMON UNITS TOTAL UNITS
-----------------------------------------------------------------------------------------------------------------------------
Genesis Energy Crude pipeline 10.2% $ 215.9 0.8x 0.6x
Crude marketing
Kaneb Pipe Line Products pipeline 7.7% $ 563.3 1.3 1.0
Storage terminals
Kinder Morgan Products pipeline 6.0% $ 536.4 0.7 0.7
Coal storage and transfer
NGL fractionation
Gas processing
Leviathan Gas Pipeline Gas pipeline 6.7% $ 745.9 2.0 1.5
Crude pipeline
Oil & gas production
-----------------------------------------------------------------------------------------------------------------------------
* APPROXIMATELY 45% OF PIPELINE MLPS ARE DIVERSIFIED AND HAVE COMPARABLE
YIELDS RELATIVE TO PURE-PLAY MLPS.
__________________________
(1) As of 1/23/98.
--------------------------------------------------------------------------
27
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
BENEFITS OF THE TRANSACTION
---------------------------------------------------------------------------
INVESTOR ISSUES (CONT'D)
---------------------------------------------------------------------------
Q: The propane industry has low annual growth (1%-2%) versus the heating
oil industry which is declining (2%-4%) each year. Why should Star
enter an industry that experiences attrition?
A: While propane is a growth industry, there are several larger and better
capitalized companies that are actively taking advantage of industry
consolidation. As a result, average acquisition multiples have been bid
up to 7x EBITDA or higher. On the other hand, Petro is the dominant
player and leading consolidator in the heating oil market. As a result,
Petro has averaged 10 acquisitions each year since 1992 at an average
purchase multiple of approximately 4x EBITDA. As demonstrated below, an
acquisition at a 4x EBITDA multiple is profitable even taking into
account attrition:
---------------------------------------------------------------------------
ACQUISITION RATE OF RETURN
---------------------------------------------------------------------------
EBITDA PURCHASE INTERNAL RATE OF
GROWTH RATE (ATTRITION) MULTIPLE RETURN (IRR)
-----------------------------------------------------------------------
(6.0%) 4.0x 15.6%
(4.0%) 4.0x 19.3%
-----------------------------------------------------------------------
(2.0%) 4.0x 22.3%
-----------------------------------------------------------------------
1.5% 7.0x 15.9%
-----------------------------------------------------------------------
---------------------------------------------------------------------------
28
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
BENEFITS OF THE TRANSACTION
--------------------------------------------------------------------------
INVESTOR ISSUES (CONT'D)
--------------------------------------------------------------------------
Q: What initiatives is Petro taking to reverse its high attrition?
A: Petro's new strategic focus includes:
- Attracting new customers through brand imaging
- Cross marketing to new and existing customers
- Improving customer service
- Creating segmented and unbundled pricing
- Create deeper customer relationships through marketing related
services
--------------------------------------------------------------------------
* ALTHOUGH THE BENEFITS OF THESE INITIATIVES HAVE BEGUN TO BE REALIZED,
THE IMPLIED VALUE HAS NOT YET BEEN FACTORED INTO PETRO'S STOCK PRICE.
THESE IMPROVEMENTS WILL SIGNIFICANTLY BENEFIT THE COMBINED ENTITY.
--------------------------------------------------------------------------
29
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
BENEFITS OF THE TRANSACTION
--------------------------------------------------------------------------
INVESTOR ISSUES (CONT'D)
--------------------------------------------------------------------------
Q: Why would Petro be interested in a merger with Star Gas?
A: Premium to market
- At $3.15 per share, the exchange represents approximately a
20% premium to the market
Higher valuation multiples
- MLPs typically trade at 10-11x EBITDA
Enhanced growth potential due to greater access to capital
- Branding and internal marketing
- Improved productivity through capital investment
- Acquisitions
Lower overall cost of capital
- New debt at +/- 8% vs. 12% existing debt
- Equity capital with limited upside
Greater size and liquidity
- Implied equity market value quintuples to over $325 million
Greater financial flexibility
- Extend maturities through refinancing
- Improved covenants due to investment grade rating
--------------------------------------------------------------------------
--------------------------------------------------------------------------
30
- --------------------------------------------------------------------------------
Star Gas Partners, L.P.
- --------------------------------------------------------------------------------
BENEFITS OF THE TRANSACTION
---------------------------------------------------------------------------
INVESTOR ISSUES (CONT'D)
---------------------------------------------------------------------------
Q: What evidence is there that Petro's recent efforts to reduce costs and
manage attrition have been successful?
---------------------------------------------------------------------------
A:
HEATING EQUIPMENT REPAIR AND
MAINTENANCE
12 MONTHS 1996 12 MONTHS 1997 IMPROVEMENT
---------------------- ---------------------- ------------------
Runouts (per 100 deliveries) 0.99 0.68 31.3%
Reworks 25.9% 24.9% 3.9%
Incompletes 5.8% 2.6% 55.2%
Not-At-Homes /(1)/ 4.2% 2.1% 50.0%
Service Calls/8 Hours 5.41 5.24 (3.1)%
OIL DELIVERY
Deliveries/8 Hours 22.2 23.9 7.7%
Gallons/Hour 569 607 6.7%
-----------------------------------------------------------------------------------------------------------
___________________________
(1) Based on performance in the first six months of the year; 3Q and 4Q
data is not available.
---------------------------------------------------------------------------
31
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
PART V
ECONOMICS OF THE TRANSACTION
---------------------------------------------------------------------------
32
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
TRANSACTION ASSUMPTIONS
---------------------------------------------------------------------------
PETROLEUM HEAT & POWER
Base Case Pessimistic Case
----------------------------------------- ----------------------------------------
$3.5 Million Maint. CapEx $3.5 Million Maint. CapEx
30-Year Weather 30-Year Weather
$1.0 Million Annual Productivity Savings $1.0 Million Annual Productivity Savings
5.0x Acquisition Multiple 4.0x Acquisition Multiple
------------------------------------------ ----------------------------------------
Attrition Acquisitions Attrition Acquisitions
1998 4.0% $50.0 Million 4.0% $20.0 Million
1999 3.0 50.0 4.0 20.0
2000 2.0 50.0 4.0 20.0
2001 2.0 50.0 4.0 20.0
STAR GAS PARTNERS
---------------------------------------------------------------------------
All Cases
---------------------------------------------------------------------------
$5.0 Million in Acquisitions per Year at 7.0x EBITDA
2% Internal Growth
$2.0 Million Internal Growth CapEx per Year
$3.0 Million in Maintenance CapEx per Year
---------------------------------------------------------------------------
---------------------------------------------------------------------------
33
- -------------------------------------------------------------------------------
Star Gas Partners, L.P.
- -------------------------------------------------------------------------------
ECONOMICS OF THE TRANSACTION
--------------------------------------------------------------------------
EFFECT OF TRANSACTION ON STAR UNITHOLDER DISTRIBUTIONS AND UNIT VALUE --
BASE CASE
------------------------------------------------------------------------------------------
CURRENT DISTRIBUTABLE CASH
-------------------------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
------------------------------------------------------------------------------------------
Earned $ 2.06 $ 2.06 $ 2.27 $ 2.43 $ 2.57 $ 2.72
Paid 2.20 2.20 2.20 2.20 2.30 2.40
Yield 9.5% 9.5% 9.5% 9.0% 8.5% 8.5%
Unit Value $23.16 $23.16 $23.16 $24.44 $27.06 $28.24
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
PRO FORMA DISTRIBUTABLE CASH
-------------------------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
------------------------------------------------------------------------------------------
Earned $ 2.19 $ 2.65 $ 2.93 $ 3.17 $ 3.54 $ 3.90
Paid 2.20 2.30 2.30 2.40 2.60 2.80
Yield 9.5% 9.5% 9.0% 8.0% 7.5% 7.0%
Unit Value $23.16 $24.21 $25.56 $30.00 $34.67 $40.00
------------------------------------------------------------------------------------------
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Star Gas Partners, L.P.
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ECONOMICS OF THE TRANSACTION
--------------------------------------------------------------------------
EFFECT OF TRANSACTION ON STAR UNITHOLDER DISTRIBUTIONS AND UNIT VALUE --
PESSIMISTIC CASE
----------------------------------------------------------------------------------------------------------
CURRENT DISTRIBUTABLE CASH
---------------------------------------------------------------------------------------
ACTUAL 1997 /(1)/ NORMALIZED 1997 /(1)/ 1998 1999 2000 2001
----------------------------------------------------------------------------------------------------------
Earned $ 2.06 $ 2.06 $ 2.27 $ 2.43 $ 2.57 $ 2.72
Paid 2.20 2.20 2.20 2.20 2.30 2.40
Yield 9.5% 9.5% 9.5% 9.0% 8.5% 8.5%
Unit Value $23.16 $23.16 $23.16 $24.44 $27.06 $28.24
----------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
PRO FORMA DISTRIBUTABLE CASH
--------------------------------------------------------------------------------------
ACTUAL 1997 /(1)/ NORMALIZED 1997 /(1)/ 1998 1999 2000 2001
---------------------------------------------------------------------------------------------------------
Earned $ 2.19 $ 2.65 $ 2.74 $ 2.80 $ 2.89 $ 2.93
Paid 2.20 2.30 2.30 2.30 2.35 2.45
Yield 9.5% 9.5% 9.5% 9.0% 8.5% 8.5%
Unit Value $23.16 $24.21 $24.21 $25.56 $27.65 $28.82
---------------------------------------------------------------------------------------------------------
________________________________________
(1) 1997 is pro forma for acquisitions.
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Star Gas Partners, L.P.
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ECONOMICS OF THE TRANSACTION
---------------------------------------------------------------------------
EFFECT OF TRANSACTION ON STAR UNIT COVERAGE -- BASE CASE
-------------------------------------------------------------------------------------
CURRENT COVERAGE
-------------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
-------------------------------------------------------------------------------------
Coverage on Common Units 1.6x 1.6x 1.7x 1.8x 1.9x 2.1x
Coverage on Total Units 0.9 0.9 1.0 1.1 1.2 1.2
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
PRO FORMA COVERAGE /(1)/
------------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
-------------------------------------------------------------------------------------
Coverage on Common Units 1.4x 1.7x 1.9x 2.1x 2.3x 2.6x
Coverage on Total Units 1.0 1.2 1.3 1.4 1.6 1.8
-------------------------------------------------------------------------------------
___________________________________
(1) Based on $2.20 annual MQD.
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Star Gas Partners, L.P.
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ECONOMICS OF THE TRANSACTION
--------------------------------------------------------------------------
EFFECT OF TRANSACTION ON STAR UNIT COVERAGE -- PESSIMISTIC CASE
-------------------------------------------------------------------------------------
CURRENT COVERAGE
------------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
-------------------------------------------------------------------------------------
Coverage on Common Units 1.6x 1.6x 1.7x 1.8x 1.9x 2.1x
Coverage on Total Units 0.9 0.9 1.0 1.1 1.2 1.2
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
PRO FORMA COVERAGE /(1)/
------------------------------------------------------------
ACTUAL 1997 NORMALIZED 1997 1998 1999 2000 2001
-------------------------------------------------------------------------------------
Coverage on Common Units 1.4x 1.7x 1.8x 1.8x 1.9x 1.9x
Coverage on Total Units 1.0 1.2 1.2 1.3 1.3 1.3
-------------------------------------------------------------------------------------
__________________________________
(1) Based on $2.20 annual MQD.
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Star Gate Partners, L.P.
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PART VI
COMPARABLE MLP ANALYSIS
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Star Gas Partners, L.P.
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COMPARABLE MLP ANALYSIS
---------------------------------------------------------------------------
COMPARATIVE ANALYSIS OF SELECTED MLPS
------------------------------------------------------------------------------------------------------------------------------
($ in millions, except per share data) MARKET IMPLIED
VALUE OF MARKET IMPLIED INDICATED
CLOSING PUBLIC VALUE OF MARKET DISTRIBUTION IMPLIED
COMPANY 23-JAN-98 EQUITY EQUITY/(1)/ CAPITALIZATION/(2)/ PER UNIT YIELD/(3)/
------------------------------------------------------------------------------------------------------------------------------
Pipelines
Buckeye Partners/(4)/ $57.94 $ 774.1 $ 781.9 $1,005.7 $4.20 7.2%
Kinder Morgan Energy Partners/(5)/ 37.25 525.6 536.4 681.6 2.25 6.0
Kaneb Pipe Line Partners/(6)/ 446.0 563.3 696.9
Senior Preference Units 35.31 2.60 7.4
Preference Units 33.63 2.60 7.7
Lakehead Pipeline Partners 45.75 1,019.8 1,223.2 1,511.1 3.12 6.8
Leviathan Gas Pipeline Partners/(7)/ 30.00 542.3 745.9 975.4 2.00 6.7
Northern Border Partners/(8)/ 33.19 747.7 1,400.6 1,785.0 2.30 6.9
TEPPCO Partners/(9)/ 54.88 795.7 816.1 1,120.8 3.40 6.2
------------------------------------------------------------------------------------------------------------------------------
PIPELINE MEAN $2.81 6.9%
PIPELINE MEDIAN 2.60 6.9
------------------------------------------------------------------------------------------------------------------------------
Diversified
EOTT Energy Partners $18.63 $ 186.3 $ 357.9 $ 460.1 $1.90 10.2%
Genesis Energy 19.63 169.3 215.9 198.4 2.00 10.2
------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED MEAN $1.95 10.2%
DIVERSIFIED MEDIAN 1.95 10.2
------------------------------------------------------------------------------------------------------------------------------
Propane
AmeriGas Partners $26.25 $ 579.1 $1,120.8 $1,886.3 $2.20 8.4%
Cornerstone Propane Partners 23.00 247.5 407.4 661.6 2.16 9.4
Ferrellgas Partners 22.13 325.3 706.5 1,246.3 2.00 9.0
Heritage Propane Partners 24.31 113.0 207.2 367.9 2.00 8.2
National Propane Partners $21.94 $ 147.0 $ 256.7 $ 395.5 $2.10 9.6
Star Gas Partners 23.50 90.0 149.3 238.3 2.20 9.4
Suburban Propane Partners 19.63 423.2 575.2 1,102.7 2.00 10.2
------------------------------------------------------------------------------------------------------------------------------
PROPANE MEAN $2.09 9.2%
PROPANE MEDIAN 2.10 9.4
------------------------------------------------------------------------------------------------------------------------------
Timber
Crown Pacific Partners, L.P $25.94 $ 553.3 $ 717.4 $1,134.0 $2.15 8.3%
Plum Creek Timber, L.P./(10)/ 32.31 1,496.8 1,995.8 2,637.8 2.20 6.8
U.S. Timberlands, L.P./(11)/ 21.25 182.3 275.1 498.6 2.00 9.4
------------------------------------------------------------------------------------------------------------------------------
TIMBER MEAN $2.12 8.2%
TIMBER MEDIAN 2.15 8.3
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
LTM DISTRIBUTABLE CASH FLOW/
----------------------------
INDICATED INDICATED
DISTRIBUTION DISTRIBUTION LTD/MARKET EBITDA/ MARKET CAP/
COMPANY TO PUBLIC UNITS TO TOTAL UNITS CAPITALIZATION INTEREST EXP. EBITDA
------------------------------------------------------------------------------------------------------------------------------
Pipelines
Buckeye Partners/(4)/ 0.8x 0.8x 18.8% 4.0x 11.7x
Kinder Morgan Energy Partners/(5)/ 0.7 0.7 19.2 3.1 17.2
Kaneb Pipe Line Partners/(6)/ 19.8 5.7 10.8
Senior Preference Units 2.3 1.0
Preference Units 1.3 1.0
Lakehead Pipeline Partners 1.5 1.2 30.6 3.8 10.3
Leviathan Gas Pipeline Partners/(7) 2.0 1.5 22.6 6.4 10.9
Northern Border Partners/(8)/ 1.3 1.0 24.1 4.0 11.5
TEPPCO Partners/(9)/ 1.4 1.4 27.6 3.5 9.9
------------------------------------------------------------------------------------------------------------------------------
PIPELINE MEAN 1.4X 1.1X 23.2% 4.3X 11.8X
PIPELINE MEDIAN 1.4 1.0 22.6 4.0 10.9
------------------------------------------------------------------------------------------------------------------------------
Diversified
EOTT Energy Partners 0.7x 0.4x 0.0% 4.3x 18.1x
Genesis Energy 0.8 0.6 0.0 NM 12.0
------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED MEAN 0.8X 0.5X 0.0% 4.3X 15.0X
DIVERSIFIED MEDIAN 0.8 0.5 0.0 4.3 15.0
------------------------------------------------------------------------------------------------------------------------------
Propane
AmeriGas Partners 2.0x 1.0x 36.3% 2.6x 11.0x
Cornerstone Propane Partners 0.7 0.5 38.1 2.1 16.8
Ferrellgas Partners 1.8 0.8 39.5 2.4 11.3
Heritage Propane Partners 1.5 0.8 44.0 2.3 12.4
National Propane Partners 1.1 0.6 34.9 2.5 13.0
Star Gas Partners 1.4 0.9 40.3 3.0 10.2
Suburban Propane Partners 0.8 0.6 38.8 2.7 12.0
------------------------------------------------------------------------------------------------------------------------------
PROPANE MEAN 1.3X 0.7X 38.8% 2.5X 12.4X
PROPANE MEDIAN 1.4 0.8 38.8 2.5 12.0
------------------------------------------------------------------------------------------------------------------------------
Timber
Crown Pacific Partners, L.P 1.2x 0.9x 35.9% 2.9x 10.5x
Plum Creek Timber, L.P./(10)/ 1.8 1.3 28.2 4.2 10.3
U.S. Timberlands, L.P./(11)/ NM NM 45.1 1.2 17.3
------------------------------------------------------------------------------------------------------------------------------
TIMBER MEAN 1.5X 1.1X 36.4% 2.7X 12.7X
TIMBER MEDIAN 1.5 1.1 35.9 2.9 10.5
------------------------------------------------------------------------------------------------------------------------------
(1) Implied Market Value of Equity implies value of total equity based on
value of public units.
(2) Implied Market Capitalization equals Implied Market Value of Equity
plus net debt and other long-term liabilities.
(3) Based on most recent distribution declared on an annualized basis.
(4) Indicated Distribution per Unit reflects an increased Quarterly
Distribution of $1.05 as announced on October 23, 1997. The increased
distribution is payable November 28, 1997, to unitholders of record on
November 5, 1997.
(5) Not pro forma for the announced merger with Santa Fe Pacific Pipeline.
Indicated Distribution per Unit reflects an increased Quarterly
Distribution of $0.5625 as announced on January 15, 1998 and payable
on February 17, 1998.
(6) Indicated Distribution per Unit reflects an increased Quarterly
Distribution of $0.65 as announced on October 9, 1997. The increased
distribution is payable November 14, 1997, to unitholders of record on
October 31, 1997.
(7) Indicated Distribution per Unit reflects an increased Quarterly
Distribution of $0.50 as announced on January 20, 1998. The increased
distribution is payable February 13, 1998, to all holders of record of
Preference Units and Common Units at the close of business on January
30, 1998.
(8) Distributable Cash Flow is based upon income statement items adjusted
for approximate 30% minority interest. Implied Market Value of Equity,
Implied Market Capitalization and Market Cap/EBITDA are not adjusted.
Indicated Distribution per Unit reflects an increased Quarterly
Distribution of $0.575 as announced on January 15, 1998. The increased
distribution is payable February 13, 1998, to unitholders of record on
January 30, 1998.
(9) Indicated Distribution per Unit reflects an increased Quarterly
Distribution of $0.85 as announced on January 16, 1998. The increased
distribution is payable February 6, 1998, to unitholders of record on
January 30, 1998.
(10) Implied Market Value of Equity and Implied Market Capitalization
include market value of GP interest based on its share of
distributions.
(11) Pro forma for the Initial Public Offering 11/13/97, the Weyerhauser
Acquisition, and for the refinancing of debt in connection with Ochoco
Acquisition. Not pro forma for any Ochoco Acquisition revenue.
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Star Gas Partners, L. P.
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EXHIBIT I
STEPS OF THE TRANSACTION AND TAX IMPLICATIONS
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40
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Star Gas Partners, L. P.
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STEPS OF THE TRANSACTION AND TAX IMPLICATIONS
--------------------------------------------------------------------------
Steps of the Transaction
. STEP ONE: Star Gas Corp. merges into Petro. Petro obtains from Star Gas
--------
Corp. the GP units of MLP and OLP and MLP subordinated units. Petro
transfers the GP units to an LLC. The subordinated units are designated
Senior Subordinated Units.
. STEP TWO: Petro transfers assets to MLP in exchange for additional
--------
Senior Subordinated Units so as to have a total number of Senior
Subordinated Units equal in value to the value of the Petro Class A
Common Stock held by the public.
. STEP THREE: Petro exchanges all LLC shares for an equivalent value of
----------
Class C shares held by Petro insiders.
. STEP FOUR: The Petro insiders transfer their remaining Class A and Class
---------
C Stock to the MLP in exchange for Junior Subordinated Units.
. STEP FIVE: OLP organized Newco. MLP transfers to OLP and OLP transfer to
---------
Newco, all Petro shares owned by the MLP, as acquired by MLP from the
Petro insiders.
. STEP SIX: Newco merges with and into Petro. Class A Shares owned by the
--------
public are changed into Senior Subordinated Units. Class A and Class C
shares owned by Newco are canceled. Newco shares owned by OLP are
changed into Class A Petro shares.
Corresponding Tax Implication
. Tax free.
. Tax free.
. This triggers tax at Petro measured by the value of the LLC shares in
excess of Petro's basis in them and tax at the Petro insider level
measured by the value of the LLC shares in excess of their basis in the
Petro shares surrendered.
. Tax free.
. Tax free.
. This step is tax free to Newco and OLP. Petro will recognize gain equal
to the value of the Senior Subordinated Units in excess of Petro's basis
in them. The public shareholders will recognize gain (or loss) measured
by the excess (or deficit) in value of the Senior Subordinated Units as
compared to their basis in the Petro Class A Common Stock.
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41