MLP IPOs have blockbuster 2014

MLP IPOs have blockbuster 2014

The North American market for initial public offerings performed very well in 2014, and Master Limited Partnerships certainly pulled their weight when it came to raising funds through these primary sales.

IPO market has strong 2014
As of December, 288 IPOs had taken place during the year on U.S. exchanges, raising more than $95 billion in the process, according to figures contained in industry report EY Global IPO Trends: 2014 Q4.

Because of this strong performance, these companies raised 54 percent more than U.S. firms generated through IPOs in 2013, a year when primary offerings experienced a recovery of sorts. In addition, the total number of these transactions reached its highest point since 2000 in December, and was 27 percent above 2013’s figure.

MLPs generate strong results
North American MLPs had raised $13 billion in 2014 by that point in the year, additional data from the document reveal. As a result, these partnerships brought in 24 percent more funds through 2014 primary sales than they did in 2013.

“Last year, 11 MLPs raised more than $5 billion.

The incidence of larger deals helped drive this sharp increase in proceeds, as last year, 11 MLPs raised more than $5 billion, compared to 16 of these firms generating more than $7 billion in 2013.

During the fourth quarter, Antero Midstream Partners LP held the largest MLP IPO in history, raising $1.15 billion, according to The Wall Street Journal. This figure surpassed the record $1.06 billion that Shell Midstream LP had brought in one week before.

While U.S. MLPs held six IPOs during the quarter, these two offerings raised more than $2.2 billion, or 57 percent of the proceeds these primary sales generated during the quarter.

Warm market reception
Shortly after these two companies completed their offerings, markets provided a warm reception and pushed their stock prices higher, The Wall Street Journal reported. While Antero’s shares climbed 12 percent their first day, Shell grabbed headlines by surging 39 percent during its first day of trading. These improvements help paint a picture of healthy demand for these companies’ securities.

MLP IPOs generated encouraging results in North America last year
MLP IPOs generated encouraging results in North America last year.

MLP IPOs generated encouraging results in North America last year.

Greg Matlock, MLP leader for Ernst & Young LLP in the US, spoke to the prospects of IPOs held by these oil and gas companies, weighing in on various trends that are providing these sales with tailwinds.

‘An attractive option’
“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 in a statement.

“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,” he added.

Role of professional investors
Matlock also spoke to the growing interest of private equity and venture capital firms, which played an integral role in helping bring U.S. companies to market in 2014. Figures provided by the EY report revealed that these professional investors backed 63 percent of 2014 U.S. IPOs.

He emphasized that as these institutions look to divest from different ventures, these exits have fueled IPO activity. Finally, Matlock emphasized the highly marketable nature of many MLPs looking to hold offerings.

Strong investor interest
“Overall, oil and gas companies coming to the public markets continue to be well led, and well priced with a good story to tell,” stated Matlock. “This is attracting solid investor interest, both from domestic and non-US investors.”

“Professional investors backed 63 percent of 2014 U.S. IPOs.”

While investors have been receptive to MLPs, there are many benefits to these partnerships they may not know about yet. In addition to offering substantial income opportunity, these investment vehicles can provide estate tax advantages and outperformance.

Investors who find these characteristics appealing might want to learn more about these partnerships and what the investment vehicles can do for their portfolios.

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