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North American oil and gas IPOs, partnerships continue steady growth

Staff writer |
North American oil and gas IPO activity continued to rise in 2014 as master limited partnerships (MLPs) accounted for nearly half of the overall deals during the year.

As of early December, 24 North American oil and gas IPOs had raised $13,371m during 2014, a 14% increase in volume and a 26% increase in value compared to 2013, according to data in a report: EY Global IPO Trends: 2014 Q4.

"More and more private equity-backed exits have been a key driver in the amount of IPO activity in the US as financial sponsors look to exit investments," said Greg Matlock, MLP leader for Ernst & Young LLP in the US.

"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-US investors."

Of the North American oil and gas IPOs during 2014, there were 11 MLPs which raised a collective $5,145m. This signifies a slight decrease in both the number and proceeds of North American oil and gas MLPs from 2013 during which 16 MLPs generated $7,252m. However, overall 2014 MLP IPO count (for both oil and gas and non-oil and gas MLP IPOs) was close to 2013 numbers, the result of 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."

More than 41% of the industry's offerings during 2014 occurred during the second quarter alone.
Notably, more than 41% 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, L.P. raised a collective $2,208m in their initial offerings – which accounted for 57% of the deal proceeds during Q42014. The quarter saw six oil and gas offerings in total.

Not surprisingly, the US led IPO activity in terms of volume and capital raised in 2014, with 19 IPO listings for a collective $10,322m. However, Canada boasted the largest offering —PrairieSky Royalty Ltd. for $1,534m.

The prominence of MLPs, particularly in the energy sector, has mirrored the rapid growth in domestic energy production. Since January 2013, over 30 new MLPs have entered the market, bringing the total number of publicly traded energy MLPs to more than 120, with more in various stages of consideration.

During 2014, a total of 11 North American oil and gas MLP offerings generated proceeds of $5,145m. The year also saw two notable movements in the space: the largest MLP IPOs ever (from Antero Midstream Partners LP and Shell Midstream Partners, L.P.) as well as the mega merger of one of the MLP pioneers - Kinder Morgan - in August.

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