Shell Subsidiary Applies for $750M IPO - Analyst Blog

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Shell Midstream Partners, L.P., a wholly owned subsidiary of the integrated energy behemoth Royal Dutch Shell plc (RDS.A), has filed for an initial public offering. The subsidiary intends to list its units on the NYSE under the ticker SHLX. The offering will likely take place in the second half of 2014 and Shell expects to raise a maximum of $750 million from it.

Investors responded positively to the news, with shares of Shell gaining 1.94% to close at $82.01 on Jun 18.

Shell Midstream Partners is anticipated to start operations with four onshore and offshore pipelines in its portfolio, mainly based in Texas and Louisiana. According to the filing, the partnership will have a 49% interest in Bengal Pipeline Company, 43% interest in the Zydeco Pipeline Company LLC, 28.6% interest in Mars Oil Pipeline Company and LLC and 1.612% interest in the Colonial Pipeline Company.

Headquartered in Houston, TX, the subsidiary was formed to operate, develop and acquire pipelines and other midstream assets. The new entity will be a master limited partnership, a structure that has become popular with several energy companies as a result of its tax benefits.

On Jun 17, the Anglo Dutch major announced plans of reducing its stake in the Australian petroleum exploration and production company, Woodside Petroleum Limited by 19%. The 156.5 million shares sale, expected to garner around $5 billion for Shell, was to take place in two parts. The first part was an underwritten sell-down to equity market investors that closed yesterday and the second part was a selective buyback by Woodside which is expected to complete in early August.

Shell is one of the major integrated energy firms in the world with a large and diversified portfolio of development projects that offer attractive long-term opportunities. The company currently has a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. market in the next one to three months.

Meanwhile, one can consider better-ranked players from the broader energy sector like TC PipeLines, LP TCP, Ultra Petroleum Corp. UPL and Encana Corp. ECA. All these stocks sport a Zacks Rank #1 (Strong Buy).


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