Despite a slower second half, deal activity in the midstream last year was notable for the dollars raised, according to a global oil and gas transactions review of 2014 by tax and transaction advisory group EY.
The midstream was buoyed by several multibillion deals—including the $71 billion Kinder Morgan Inc. (NYSE: KMI) rollup; the $34.4 billion merger of Access Midstream Partners with Williams Partners LP (NYSE: WPZ) and the almost $8 billion deal between Targa Resources Partners LP (NYSE: NGLS) and Atlas Pipeline Partners—and total transaction value increased 115% above 2013.
Volume was another story, however, as the number of deals decreased for each segment except the downstream, EY said. That activity was down 23% in 2014 with only 102 announced deals. Disclosed deal value, however, doubled to more than $150 billion.
Deals in the U.S. and Canada dominated midstream transaction activity, both in volume and value, EY said in its review. All told, the two North American countries accounted for more than 78% of all midstream deals and about 94% of disclosed midstream value worldwide.
Pipelines drove the most action with 46 deals amounting to $17.6 billion, about 40% of the total. Those transactions were rounded out by 30 in diversified deals worth about $131 billion and 17 transactions totaling about $11 billion involving gathering and processing assets.
It was again the unconventional oil and gas boom in the U.S. that racked up attention to infrastructure investment, launching it to an all-time high, EY said.
“We’ve also seen increasing consolidation, spurred on by significant tax advantages for MLP structures,” the analysts said.
Despite Kinder Morgan’s October exit from the MLP structure when it rolled its entities back into a corporation, the structure remains a solid one for midstream investors.
“MLPs offer a wealth of benefits to both sponsor companies and individual investors while providing low-cost, alternative for of capital for expansion and growth,” EY said.
Contact the author, Deon Daugherty, at ddaugherty@hartenergy.com.
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