Shell Midstream files for IPO in bid to buy stakes in US pipelines

Shell Midstream Partners, a master limited partnership (MLP) formed by Royal Dutch Shell, yesterday filed for an initial public offering (IPO) in a bid to raise up to $750m (£443m).

Shell Midstream, based in Houston, Texas, said in its IPO prospectus that it planned to use proceeds from the offering to acquire stakes in some pipeline companies from Shell Pipeline Company, a US unit of Royal Dutch Shell, in exchange for cash distribution.

The filing with the US Securities and Exchange Commission did not provide an expected size or unit price for the offering.

Shell Midstream’s assets will include a 43 per cent stake in Zydeco Pipeline Company, a 28.6 per cent stake in Mars Oil Pipeline Company and a 49 per cent stake in Bengal Pipeline Company.

These companies own pipelines that run along the coasts of Texas and Louisiana, as well as in offshore Louisiana. They also own pipelines that transport refined products from the Gulf Coast and the south eastern US.

Shell Midstream reported net income of $23.8m on revenue of $36.1m for the quarter ended 31 March, on a pro forma basis, according to the IPO filing.

Offerings from oil and natural gas companies constituted 23 of the more than 250 IPOs over the past 12 months.

Shell Midstream said in its filing that Barclays and Citigroup were underwriting.

Royal Dutch Shell is expected to keep a major stake in the company following its debut on the stock market.

An MLP structure allows companies to raise money in the stock market while having income taxed only at the unit holder level, avoiding corporate income taxes.