North American oil and gas IPOs, MLPs continue steady growth

-- MLPs continue to dominate in North America oil and gas offerings

-- Second quarter led volume and value for 2014 IPOs

-- Oil price uncertainty clouds 2015 expectations

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Jan 08, 2015, 09:00 ET

HOUSTON, Jan. 8, 2015 /PRNewswire/ -- 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 US$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 US$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."

Offering activity spikes in Q2, US led the way
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 US$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 US$10,322m. However, Canada boasted the largest offering —PrairieSky Royalty Ltd. for US$1,534m.

MLPs popularity continues
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 US$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.

"While the market definitely took notice of Kinder Morgan's consolidation, it doesn't reflect an emerging trend or broader problem with the MLP market," Matlock said. "As we saw with the tremendous IPOs from Antero Midstream Partners LP and Shell Midstream Partners, L.P., MLPs continue to offer a wealth of benefits to both sponsor companies and investors."

Expectations for 2015
The dramatic fall in oil prices – which traded at five-year lows earlier this week – adds uncertainty to IPO conversations for 2015.

"Oil prices are particularly impactful because of how they influence the market and the valuation of certain companies looking to go public," Matlock said. "That being said, the 2015 MLP (and broader IPO) markets are expected to continue to be strong. Suppressed oil prices may continue to inject volatility in public stock prices, which may push IPOs back in the year, but given the investors' thirst for yield and focus on long-term growth, we still expect to see a relatively good market. This also may present an opportunity for non-oil and gas MLPs to thrive in a potentially volatile oil and gas market."

Notes to editors

About EY
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This news release has been issued by Ernst & Young LLP, a member of the global EY organization that provides services to clients in the US.

About the data
Analysis included on this press release includes all deals listed up to early December and EY's expectation of deals that will close in the rest of the month. Data sourced from Dealogic as of 4 December 2014. January 2014 through December 2014 IPO activity is based on priced IPOs as of 4 December and expected IPOs by the end of December.

About EY's IPO offering
EY is a leader in helping to take companies public worldwide. With decades of experience our global network is dedicated to serving market leaders and helping businesses evaluate the pros and cons of an IPO. We demystify the process by offering IPO readiness assessments, IPO preparation, project management and execution services, all of which help prepare you for life in the public spotlight. Our Global IPO Center of Excellence is a virtual hub which provides access to our IPO knowledge, tools, thought leadership and contacts from around the world in one easy-to-use source. For more information, please visit www.ey.com/ipocenter. Additional information on MLPs specifically can be found at: www.ey.com/oilandgas/MLP.

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