View at a British Petroleum petrol station. (Photo credit should read RONALDO SCHEMIDT/AFP/Getty Images)
Deal Overview
On September 11, 2017, BP Plc (NYSE: BP, $35.56, Market Capitalization $117.1 billion), announced that BP Midstream Partners LP, a wholly owned, indirect subsidiary of BP Plc has filed a registration statement (Form S-1) with the U.S. Securities and Exchange Commission (SEC) related to the proposed initial public offering (IPO) of its common units representing limited partner interests. Post separation, the common units of BP Midstream Partners will trade on New York Stock Exchange (NYSE) under ticker symbol “BPMP”. The company expects to complete the offering in 4Q17, subject to market conditions.
BP Midstream Partners was formed as a vehicle to own, operate, develop and acquire pipelines and other midstream assets. BP Midstream Partners’ initial assets are expected to consist of ownership interests in one onshore crude oil pipeline system, one onshore refined products pipeline system, and one onshore diluent pipeline system, which carry shipments to or from BP’s Whiting Refinery in Whiting Indiana, together with interests in four offshore crude oil pipeline systems and one offshore natural gas pipeline system that connect offshore production areas in the Gulf of Mexico with the Gulf Coast refining and distribution hubs. Post separation, BPMP will be headquartered in Houston, Texas, with offices in Chicago, Illinois.
Citigroup, Goldman Sachs and Morgan Stanley are acting as book-running managers and Citigroup is acting as structuring agent for the proposed offering. If the IPO is completed, BP would own the general partner of BP Midstream Partners, all of its incentive distribution rights and a majority of its limited partner interests.
We did a potential spin-off announcement report on 7/21, after BP Plc had announced that it was contemplating the separation of midstream assets (crude oil, natural gas and refined product pipelines located in the Midwest and on the U.S. Gulf Coast) via a formation of a master limited partnership.
Deal Rationale
The integrated oil majors, in light of depressed oil prices have been shedding non-core assets and looking at alternative avenues to raise capital. BP’s rival Royal Dutch Shell concluded a public offering of its midstream assets in June, 2014, raising nearly $1.0 billion (£770 million). Shell was the first oil major to use Master-Limited Partnership (MLP) structure to generate cash from its assets and utilize the proceeds to maintain and expand its network of pipelines. Concurrent with this industry trend, BP is now conducting an IPO of its proposed MLP (BP Midstream Partners), which would allow BP to raise funds from the market while maintaining strategic control of the assets. BP currently owns over 3,500 miles of pipelines and terminals that carry 1.3 million barrels of crude, natural gas and refined fuel products per day. The strategic move to separate midstream assets provides a great opportunity for BP to monetize its vast pipeline infrastructure assets. The planned MLP IPO of midstream assets will offer prospective investors a relatively steady revenue stream due to lower volatility of shipping rates as compared to oil prices. This tax-efficient corporate structure will help the MLP to generate more value for its unit holders while creating opportunities for the expansion of the pipeline business.
">View at a British Petroleum petrol station. (Photo credit should read RONALDO SCHEMIDT/AFP/Getty Images)
Deal Overview
On September 11, 2017, BP Plc (NYSE: BP, $35.56, Market Capitalization $117.1 billion), announced that BP Midstream Partners LP, a wholly owned, indirect subsidiary of BP Plc has filed a registration statement (Form S-1) with the U.S. Securities and Exchange Commission (SEC) related to the proposed initial public offering (IPO) of its common units representing limited partner interests. Post separation, the common units of BP Midstream Partners will trade on New York Stock Exchange (NYSE) under ticker symbol “BPMP”. The company expects to complete the offering in 4Q17, subject to market conditions.
BP Midstream Partners was formed as a vehicle to own, operate, develop and acquire pipelines and other midstream assets. BP Midstream Partners’ initial assets are expected to consist of ownership interests in one onshore crude oil pipeline system, one onshore refined products pipeline system, and one onshore diluent pipeline system, which carry shipments to or from BP’s Whiting Refinery in Whiting Indiana, together with interests in four offshore crude oil pipeline systems and one offshore natural gas pipeline system that connect offshore production areas in the Gulf of Mexico with the Gulf Coast refining and distribution hubs. Post separation, BPMP will be headquartered in Houston, Texas, with offices in Chicago, Illinois.
Citigroup, Goldman Sachs and Morgan Stanley are acting as book-running managers and Citigroup is acting as structuring agent for the proposed offering. If the IPO is completed, BP would own the general partner of BP Midstream Partners, all of its incentive distribution rights and a majority of its limited partner interests.
We did a potential spin-off announcement report on 7/21, after BP Plc had announced that it was contemplating the separation of midstream assets (crude oil, natural gas and refined product pipelines located in the Midwest and on the U.S. Gulf Coast) via a formation of a master limited partnership.
Deal Rationale
The integrated oil majors, in light of depressed oil prices have been shedding non-core assets and looking at alternative avenues to raise capital. BP’s rival Royal Dutch Shell concluded a public offering of its midstream assets in June, 2014, raising nearly $1.0 billion (£770 million). Shell was the first oil major to use Master-Limited Partnership (MLP) structure to generate cash from its assets and utilize the proceeds to maintain and expand its network of pipelines. Concurrent with this industry trend, BP is now conducting an IPO of its proposed MLP (BP Midstream Partners), which would allow BP to raise funds from the market while maintaining strategic control of the assets. BP currently owns over 3,500 miles of pipelines and terminals that carry 1.3 million barrels of crude, natural gas and refined fuel products per day. The strategic move to separate midstream assets provides a great opportunity for BP to monetize its vast pipeline infrastructure assets. The planned MLP IPO of midstream assets will offer prospective investors a relatively steady revenue stream due to lower volatility of shipping rates as compared to oil prices. This tax-efficient corporate structure will help the MLP to generate more value for its unit holders while creating opportunities for the expansion of the pipeline business.
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