BP Midstream Partners’ initial assets are expected to consist of ownership interests in one onshore crude oil pipeline system, one onshore refined products pipeline system, and one onshore diluent pipeline system, which carry shipments to or from BP’s Whiting Refinery in Whiting, Indiana, together with interests in four offshore crude oil pipeline systems and one offshore natural gas pipeline system that connect offshore production areas in the Gulf of Mexico with the Gulf Coast refining and distribution hubs.
The parent company will still have a stake and will own BPMP’s General Partner (GP), its incentive distribution rights and a majority of its limited partner interests. For those wondering how the structure looks, here is a ‘simplified’ picture of the proposed structure taken from the S-1 filing:
(Source: S-1)
Very simple right? The plan is part of BP’s efforts to raise cash in order to order to pay down its sizable debt load. By how much it can redice it will depend will on the amount of BPMP it decides to keep, but Tudor, Pickering and Holt thinks it could be over $1b:
…but if it retains 60%, the spinoff should bring in cash proceeds of $600 million plus transfer $500 million in debt to the new entity, which could lead to $1.1 billion in net debt reduction for the company, according to estimates by analysts at Tudor, Pickering, Holt & Co.
Certainly sizable, but the impact isn’t expected to be as large as Royal Dutch Shell’s (RDSA) 2014 midstream spinoff, Shell Midstream Partners (SHLX). The company announced a couple of other moves as well and many expect further ‘dropdowns’ into the MLP to occur in the future. The real question is what does the company do next.
The IPO is expected to be finalized during Q4 this year, but timing is always dependent on ‘market conditions’. Historically, we have seen a number of IPOs pushed off or even shelved due to bad ‘timing’ so it will be interesting to see what happens here.
Disclosure: Author holds no position in any stock mentioned.
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