Investors have been favorable toward oil and gas asset IPOs carved out of larger energy players in 2014. Required to distribute the cash they generate, these master limited partnerships (MLPs) offer reliable yields with the potential to grow depending on the oil and gas production of the parent. We now have two of these midstream MLPs on the IPO calendar for this week and next (CONE Midstream and JP Energy), and three more could soon launch - spinoffs from Shell (NYSE: RDS.A), Antero Resources (NYSE: AR) and Dominion Exploration & Production (NYSE: D).
| Upcoming midstream oil and gas IPOs | |||
| Company (Ticker) | Business | Lead underwriters | Deal Size ($mm) |
| CONE Midstream Partners LP (CNNX) |
CONSOL and Noble JV in the Marcellus |
Wells Fargo BofA Merrill, Citi |
$350 |
| JP Energy Partners LP (JPEP) |
Crude, refined, & NGL midstream assets | Barclays, BofA, RBC Deutsche Bank |
$275 |
| Shell Midstream Partners LP (SHLX) | Crude/refined pipelines in the Gulf Coast | Barclays, Citi, UBS Morgan Stanley |
$750 |
| Antero Midstream Partners LP (AM) | Midstream assets in the Marcellus/Utica | Barclays, Citi Wells Fargo |
$500 |
| Dominion Midstream Partners LP (DM) |
LNG transport, storage & regasification | Barclays, Citi JP Morgan |
$400 |
2014 Midstream oil and gas IPOs
The most comparable recent offering is Enable Midstream Partners LP (ENBL), which has traded up about 25% since its April IPO. Enable Midstream met the Renaissance IPO ETF's (NYSE: IPO) minimum market cap requirement, and is included in the ETF. The IPO ETF, which is expected to add Alibaba (BABA) as its top holding at the end of Thursday, trades at the high end of its year-to-date range, suggesting that the IPO market remains open to new issuance.
Other 2014 midstream MLP IPOs include VTTI Energy Partners LP (VTTI), which owns refined product and crude oil terminals, and PBF Logistics LP (PBFX), which owns crude oil logistics assets. VTTI gained 5% on its August IPO and has since traded up for a total return of 17%. PBF Logistics priced above the range on its May IPO and gained 20% on its first day, but subsequently fell for a total return of 13%.
Midstream MLP IPOs ahead
Midstream IPOs on the calendar include CONE Midstream Partners LP (CNNX), which is set to raise $350 million when it prices on Wednesday, September 23, and JP Energy Partners LP (JPEP), which set terms on Monday to raise $275 million for pricing next week.
CONE Midstream Partners LP (CNNX) was jointly formed by CONSOL Energy (NYSE: CNX) and Noble Energy (NYSE: NBL) to acquire and operate natural gas gathering and other midstream assets to support the sponsors' growing production in the Marcellus Shale. Backed by ArcLight Capital, JP Energy has acquired pipelines, storage facilities, terminals and other midstream assets in the Midwestern US. Its primary customers include Glencore, Chesapeake (NYSE: CHK) and Phillips 66 (NYSE: PSX).
Successful IPOs from CONE and JP Energy could encourage IPO launches from Shell Midstream Partners LP (SHLX), Antero Midstream Partners LP (AM) and Dominion Midstream Partners LP (DM). Shell Midstream, which originally filed in June with a $750 million deal size, signaled it is preparing to set terms as it recently updated its financials and added underwriters. Antero Midstream, on file for a $500 million IPO since February, amended its filing last week by updating its use of proceeds and key metrics. Dominion Midstream also amended its filing in September, disclosing ownership of additional pipeline interests. Three more energy MLPs submitted initial filings on Wednesday, including a spinoff of midstream assets from Hess (HESM), LNG carriers carved out of Exmar (XMLP) and a Wexford-backed MLP offering oil and gas drilling and completion services (TUSK).
Two oil and gas rail MLPs on track for 2014 IPOs
An alternative to pipelines, transporting oil and gas by rail has picked up steam in the US. Backed by Goldman Sachs and Energy Capital Partners, USD Partners LP (USDP) filed for a $150 million IPO in early September. The company operates oil and gas rail terminals in the Alberta, Texas and California.
PES Logistics Partners LP (PESL), which submitted an initial filing for a $250 million IPO on Monday, was formed by Carlyle (NASDAQ:CG) and Energy Transfer Partners (NYSE: ETP) to own a crude oil rail unloading terminal in Philadelphia.
