Pipeline MLP dominates first-quarter North American IPO data

An oil and gas company that went public as a master limited partnership (MLP) generated more proceeds than any other North American IPO during the first quarter of 2015. Columbia Pipeline Partners LP, an owner and operator of natural gas transportation pipelines and related energy infrastructure assets, raised more than $1.23 billion during its IPO in late February.

As of mid-March, two North American oil and gas IPOs generated a collective $1.24 billion during the first quarter of 2015, a 50% decrease in volume and a 46% drop in value compared to the first quarter of 2014, according to data in the report EY Global IPO Trends: 2015 Q1.

“As oil and gas companies adjust to the lower commodity price environment, many have wondered how MLPs would be impacted,” said Greg Matlock, MLP leader for Ernst & Young LLP in the US. “However, in raising more than $1 billion as the first MLP to go public in 2015, Columbia Pipeline Partners set a positive tone for the year and clearly demonstrated that MLPs continue to be an attractive and capital efficient structure for certain types of assets.”

Over the last several years, the MLP structure’s popularity has increased. With more than 120 MLPs and a market cap of more than $600 billion, MLPs are no longer a niche product. 

“Despite the recent decline in oil prices, the US still has extensive oil and gas reserves that need to be transported to market, and the MLP vehicle is an incredibly efficient capital structure to develop that necessary infrastructure,” Matlock said. “Strong sponsor-backed MLPs in the midstream space, in particular, continue to receive positive market response.”

Private equity will also continue to play an impactful role in oil and gas IPOs and MLPs.

“Over the past couple of years, we have seen significant, very sophisticated private equity firms that have a great eye for management and talent play a larger role in some of these MLPs – and that will likely continue,” Matlock said.

As a whole, the number and proceeds of North American oil and gas IPOs did, however, see a rapid decline – approximately 71% – from fourth-quarter 2014 to first-quarter 2015.

“While certain companies have postponed going public as a result of the volatile commodity markets, the lower number of IPOs is more likely attributed to a wide variety of factors – business reasons, focusing on different avenues of capital, etc.,” Matlock said. “Going public is a lengthy process and companies looking to do so in the next 9–12 months are probably still proceeding as planned.”

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