Citi Initiates Coverage On Shell Midstream Partners LP

Citi initiated coverage on Shell Midstream Partners LP SHLX Sunday with a Buy rating and $48 price target.

Analysts led by Mohit Bhardwaj noted that “since the IPO, units are up almost 60 percent. We believe units will continue to move higher as Shell provides more clarity on the potential size of its global midstream portfolio.

“We estimate Shell could drop ~$2.0 bn in EBITDA into SHLX and grow distributions 30 percent per annum through 2020. Shell runs the largest offshore pipeline system in North America and has other crude, refined product, natural gas, LNG and chemicals assets that will allow it to grow the MLP faster than most of its peers.”

“SHLX's initial assets comprise a 43.0 percent interest in the Zydeco Pipeline Company, a 28.6 percent interest in the Mars Oil Pipeline Company, 49.0 percent of the Bengal Pipeline Company and 1.6 percent of the Colonial Pipeline Company. We estimate these initial assets will generate over ~$100mm in EBITDA over the NTM,” according to Bhardwaj.

Shell Midstream Partners LP recently traded at $35.87, up 1.85 percent.