Shell Midstream Partners LP sets terms for $750 million IPO

Shell Midstream Partners LP, an MLP carved out of Shell to own crude oil and refined products pipelines in the Gulf Coast, announced terms for its IPO on Monday. The Houston, TX-based company plans to raise $750 million by offering 37.5 million shares at a price range of $19 to $21. At the midpoint of the proposed range, it would command a market value of $2.8 billion.

Business
Shell Midstream owns interests in four pipelines that operate in Texas, Mississippi and Louisiana and on the East Coast and expects to make additional drop down acquisitions from Shell's (RDS.A) portfolio of midstream assets. It will own interests in the Zydeco pipeline (43% interest; 350 miles of pipeline), Mars (29%; 163 miles), Bengal (49%; 158 miles) and Colonial (2%; 5,500 miles).

Recent financials
For the six months ended June 30, 2014, revenue grew 47% to $80 million due to new contract rates and higher non-contract tariff rates related to its newly completed flow reversal project of an existing pipeline, as well as a 2% increase in volume. Adjusted EBITDA jumped to $47 million from $15 million in the 1H13 primarily because environmental cleanup costs in the first half of 2013. Pro forma the formation transactions, adjusted EBITDA attributable to Shell Midstream Partners LP for the 12 months ended June 30 was $53 million.

Midstream MLP IPOs
In each of the past four weeks a midstream energy MLP went public (CNNX, JPEP, USDP, DM) and the group has seen mixed trading. Last week's MLP offering, Dominion Midstream, has traded up over 30% above its IPO price. Energy MLPs continue to fill the pipeline, and a successful IPO from Shell could encourage February filer Antero Midstream (AM) to file terms for its estimated $500 million IPO as well.

Shell Midstream Partners LP, which was founded in 2014 and booked $117 million in sales for the 12 months ended June 30, 2014, plans to list on the NYSE under the symbol SHLX. Barclays, Citi, Morgan Stanley and UBS Investment Bank are the joint bookrunners on the deal. It is expected to price during the week of October 27, 2014.