Shell Midstream Partners debuts largest MLP IPO in a decade

Shell Midstream Partners LP yesterday debuted one of the largest master limited partnership (MLP) initial public offerings in over 10 years.

Royal Dutch Shell plc's MLP launch, priced on Tuesday at $19-21/share, opened at $23.00/unit and went on to raise $920 million, well above expectations of $785 million, through the sale of 40 million shares, representing 29 per cent of the company's capital.

The remaining limited partnership interest would be held by Royal Dutch Shell through subsidiaries.

The company could end up raising $1.06 billion if an overallotment of shares was fully exercised.

The company was valued at $1.56 billion ahead of the launch.

In afternoon trading yesterday, the partnership was more than 44 per cent higher at $33.19 on the New York Stock Exchange, and ended up closing the day at $33.55/share, up 46 per cent from the opening.

Shell Midstream Partners, holds stakes in onshore pipeline systems in Louisiana, Texas and Mississippi, as also in the Gulf of Mexico.

Among its pipeline system interests are Zydeco Pipeline Co, Mars Oil Pipeline Co and Bengal Pipeline Co LLC and Colonial Pipeline Co.

The offering comes with Ben van Beurden, the chief executive of Royal Dutch Shell, seeking to improve lacklustre returns through expenses and capital outlay cuts, The New York Times reported.

Under the deal, minority stakes in a group of pipelines primarily in Louisiana and Texas, on the Gulf Coast would be sold. Shell would be able to take steps toward its goals while continuing to operate the pipelines, under the deal.

The Houston-based company was formed to own, operate, develop and acquire pipelines and other so-called midstream assets in the oil and natural gas industry.