Shell to join the trend for pipeline investing
Company plans a tax-exempt master limited partnership
Royal Dutch Shell will sell shares in a U.S. pipeline business in the second half of this year as Europe’s largest oil company takes advantage of investor appetite for North America’s energy infrastructure.
Shell Midstream Partners LP’s assets are expected to consist of ownership interests in four onshore and offshore pipelines located primarily in Texas and Louisiana, according to a filing Wednesday. The Houston-based partnership will trade on the New York Stock Exchange under the ticker SHLX.
Pipeline companies structured as tax-exempt master limited partnerships, or MLPs, have attracted investors by returning almost all their income to shareholders. Share prices have soared amid a boom in oil and gas production from U.S. shale fields. Shell Midstream forecasts $96.5 million of cash available for distribution to investors over the next 12 months.
“Everybody and their dog has got an MLP no win the U.S.,” said Iain Reid, a London-based analyst for BMO Capital Markets who rates Shell a buy and owns none of the shares. “The majors have kind of shied away from it, so this may be breaking newground.”
The announcement comes two days after Williams Cos. said it will pay $6 billion to buy control of Access Midstream Partners LP, the pipeline operator taken public in 2010 by Chesapeake Energy Corp. under ousted chief executive officer Aubrey Mc Clendon. The shale wildcatter nowplans to invest in pipelines and processing plants through a midstream unit of his American Energy Partners LP, according to a statement Wednesday.
“Now you’ve got the first major and that’s got us excited,” Matt Sallee, who helps manage $17.5 billion at Tortoise Capital Advisors in Leawood, Kan., including the first closed-end fund focused on MLPs. “It would not be surprising to see others follow suit. Shell’s putting a seal of approval on the MLP space today.”
Shell didn’t say how much cash it will raise from the initial public offering. It’s proposing to sell a 49 percent stake in the partnership that will own the assets and a 2 percent stake in the unit that will run the operation.