Engineering News

Shell Launches U.S. Pipeline IPO
June 18, 2014

une 18 (Reuters) - Royal Dutch Shell Plc said it would spin off some of its U.S. pipelines into a master limited partnership (MLP) and take it public, becoming the first of the industry majors to use such a structure to monetize assets.

Shell Midstream Partners LP filed with U.S. regulators on Wednesday to raise up to $750 million in an initial public offering of common units.

Companies holding midstream assets, such as pipelines and storage facilities, and structured as MLPs have found favor with investors as they distribute most of their earnings to shareholders.

The listing of two MLPs, PBF Logistics LP and GasLog Partners LP, in May stood out in a lackluster IPO market.

Shell Midstream, which owns stakes in four onshore and offshore pipelines in Texas and Louisiana, said in its IPO prospectus that it plans to use proceeds from the offering to acquire stakes in Shell's other pipelines.

Shell, like other big oil companies, is facing increasing pressure from investors to cut soaring costs and raise shareholder returns via dividends and share buybacks.

The company's plan to spin off its pipeline assets comes a day after it launched a sale of most of its stake in Australia's Woodside Petroleum Ltd. It plans to shed $15 billion of assets by the end of next year.

"As all of the majors have significant midstream assets, and as they have a tendency to mimic one another's strategy at times, it will be interesting to see if the other majors begin to follow Shell's lead on this front," Simmons & Co analysts wrote in a note.

Shell Midstream's assets include a 43 percent stake in a crude oil pipeline connecting Houston in Texas to Houma in Louisiana, a 28.6 percent stake in a pipeline to the offshore Mars field in the Gulf of Mexico and a 49 percent stake in a refined products pipeline linked to four Louisiana refineries.

Shell Midstream reported net income of $23.8 million on revenue of $36.1 million for the quarter ended March 31, on a pro forma basis, according to the IPO filing.

Barclays and Citigroup are underwriting the IPO, the Houston, Texas-based company said in its filing with the U.S Securities and Exchange Commission. (http://bit.ly/1iG7z6c)

The filing did not reveal how many shares the company planned to sell or their expected price for the offering, which is expected in the second half of the year.

The company said it intends to list its common units on the New York Stock Exchange under the symbol "SHLX".

The amount of money a company says it plans to raise in its first IPO filing is used to calculate registration fees. The final size of the IPO could be different.

Shell's U.S.-listed shares were up 1.3 percent at $81.48 in late morning trading.

Source: Reuters

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