I heard there was finally an MLP IPO this year. Will you talk about the IPO and review MLP IPO history?
At the Alerian MLP Awards (The Ammys) this past February, we asked attendees to make predictions regarding the MLP space in 2016. One of the questions was, “How many MLP IPOs will there be in 2016?”
The answers were as follows:
One or Two: 32%
Three or Four: 15%
More than Five: 5%
We can’t really blame the 48% who expected a goose egg this year. After all, we asked these questions on February 16, 2016, just five days after MLPs had hit their lowest point of the cycle. Fortunately, we’ve witnessed a recovery since this time, and last week (on September 14th) Noble Midstream Partners (NBLX) announced the pricing of its IPO of 12,500,000 common units. Encouragingly, the units priced at $22.50, above the original estimates of $19.00 to $21.00, for a total raise just around $280 million prior to fees. According to NBLX’s S-1, the company will provide crude oil, natural gas, and water-related midstream services (most assets are pipelines), to their sponsor, Noble Energy (NBL). Going forward, NBLX also plans to provide similar services to third parties.
Now, let’s quickly take a look back at MLP IPO history.
MLP IPOs Dropped Off Significantly as a Result of the Energy Cycle
Clearly, the most recent energy cycle took its toll on MLP IPOs. From the all-time high in 2013, we saw a double digit drop in 2015 as oil prices declined significantly and the market became weary of hydrocarbon-related investments. The last time the MLP IPO markets were halted was also during the last energy decline, which coincided with The Great Recession. After a summer and fall that finance professionals cannot forget, the debt markets opened up for MLPs in December 2008. It wasn’t until 17 months after that, or April 2010, that the IPO market reopened for MLPs. Will we see another MLP IPO in 2016? Forty percent of this year’s Ammys attendees think we’ll see at least one more. With nine PLRs issued this year and NBLX pricing above expectations we think an uptick is possible.