Oil and gas companies attracting foreign and domestic investors
January 12, 2015 | By
Barbara Vergetis Lundin
North American oil and gas IPO activity continued to rise in 2014 as master limited partnerships (MLP) accounted for nearly half of the overall deals during the year. As of early December, 24 North American oil and gas IPOs had raised $13.371 million during 2014 -- a 14 percent increase in volume and a 26 percent increase in value compared to 2013. This is according to data from Ernst & Young (EY). "More and more private equity-backed exits have been a key driver in the amount of IPO activity in the U.S. as financial sponsors look to exit investments," said Greg Matlock, MLP leader for Ernst & Young LLP in the U.S. "Overall, oil and gas companies coming to the public markets continue to be well led, and well-priced with a good story to tell. This is attracting solid investor interest, both from domestic and non-U.S. investors." Of the North American oil and gas IPOs during 2014, there were 11 MLPs which raised a collective $5.145 million -- a slight decrease in both the number and proceeds of North American oil and gas MLPs from 2013 during which 16 MLPs generated $7.25 million. However, overall 2014 MLP IPO count (for both oil and gas and non-oil and gas MLP IPOs) was close to 2013 numbers, resulting from continued market interest in the MLP product. "With interest rates at persistently low levels, MLPs (and the broader IPO markets) remain an attractive option. Many oil and gas MLPs in 2014 outpaced and outperformed expectations and were welcomed with opened arms from investors," Matlock said. "Further, increased interest in other growth and yield-based investment vehicles like the 'YieldCo' structure and the 'non-US MLP' structure have driven (and are expected to continue to drive) interest in the sector of accessing the public markets." Notably, more than 41 percent of the industry's offerings during 2014 occurred during the second quarter alone. While the second quarter was especially impactful in terms of deal volume, Q42014 boasted the largest MLP offerings ever. Together, Antero Midstream Partners LP and Shell Midstream Partners LP raised a collective $2.208 million in their initial offerings -- which accounted for 57percent of the deal proceeds during Q42014. The quarter saw six oil and gas offerings in total. The United States led IPO activity in terms of volume and capital raised in 2014, with 19 IPO listings for a collective $10.3 million. During 2014, a total of 11 North American oil and gas MLP offerings generated proceeds of $5.145 million. The year also saw two notable movements in the space: the largest MLP IPOs ever (from Antero Midstream Partners LP and Shell Midstream Partners LP) as well as the mega merger of one of the MLP pioneers -- Kinder Morgan -- in August. "While the market definitely took notice of Kinder Morgan's consolidation, it doesn't reflect an emerging trend or broader problem with the MLP market," Matlock said. "As we saw with the tremendous IPOs from Antero Midstream Partners LP and Shell Midstream Partners LP, MLPs continue to offer a wealth of benefits to both sponsor companies and investors." The dramatic fall in oil prices -- which traded at five-year lows earlier this week -- adds uncertainty to IPO conversations for 2015. "Oil prices are particularly impactful because of how they influence the market and the valuation of certain companies looking to go public. That being said, the 2015 MLP (and broader IPO) markets are expected to continue to be strong," Matlock predicted. "Suppressed oil prices may continue to inject volatility in public stock prices, which may push IPOs back in the year, but given the investors' thirst for yield and focus on long-term growth, we still expect to see a relatively good market." This may also present an opportunity for non-oil and gas MLPs to thrive in a potentially volatile oil and gas market, he added. For more: © 2015 FierceMarkets, a division of Questex Media Group LLC. All rights reserved. |