The ongoing need for midstream assets continues to spur interest in limited partnerships which focus on developing the infrastructure for the growing amount of oil and gas in the U.S.
After a year of active market for initial public offerings (IPO), Marathon Petroleum Corp. announced it is considering an IPO for its pipeline assets, which could be worth as much as $6.2 billion.
Marathon Petroleum Corp., the downstream division, which separated from Marathon Oil Corp. in June 2011, did not give a specific timeframe for its upcoming offering, but analysts say they expect it will happen sometime in the second half of 2012.
Analysts have pointed out that the tax and valuation benefits of the MLP generally outweigh the costs of an IPO and those that go through the change generally receive a lower cost of capital and higher valuation ratios from investors.
EQT Corp. also announced plans to form an MLP with its midstream assets. The new entity, EQT Midstream Partners, is expected to raise up to $250 million once its common units are issued. The new midstream company will include assets in the Appalachian Basin in the Marcellus shale area.
Meanwhile, Quicksilver Resources Inc. announced it will issue public units in a subsidiary limited partnership which holds some of its Barnett shale assets. It did not announce when it expected the IPO to become effective or how much it expected to raise through the process, but it is additional evidence of the interest in new capital for midstream players.
Copano Energy LLC announced it had closed on a secondary public offering of 5.75 million common units, priced at $34.03 per unit. It intends to use the proceeds from the offering of about $187 million to repay outstanding debt.
The allure of the midstream sector also continues to draw in acquisitions in the sector. Several were announced over the past month, and one of the largest was AtlaGas Ltd., which will purchase Semco Inc. for $1.14 billion. Semco is a privately held Michigan gas distribution business and a regulated natural gas storage facility with assets in Michigan, Alaska and New Mexico.
Veresen Inc. purchased natural gas processing assets in British Columbia for about $910 million from Encana Corp. The assets include Encana's interest in the Steeprock plant in northeast British Columbia and the Hythe plant in northwest Alberta. In addition, it includes compression assets and 231 miles of associated gathering lines.
Oil and gas companies spent $259 billion buying out other U.S. energy companies last year, a 14% increase from the previous year, according to a recent report from Deloitte LLC. Two of the three largest acquisitions in the energy sector last year were in the midstream sector, drawn by the need to place additional assets in the ground to move the growing amount of production from unconventional sources.
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