BP’s Midstream IPO: Ready to Hit the Market?



BP’s midstream IPO

BP’s (BP) midstream MLP (master limited partnership), BP Midstream Partners LP, has filed a registration statement with the SEC (Securities and Exchange Commission) for its proposed IPO (initial public offering). The IPO would offer limited partnership interests in the MLP.

The MLP’s initial midstream assets would consist of onshore and offshore pipeline systems. The onshore pipeline systems currently serve BP’s Whiting refinery. The offshore pipelines connect the US Gulf Coast refineries and distribution hubs to the offshore production centers in the Gulf of Mexico.

The onshore system includes:

  • ownership stake in one onshore crude oil pipeline system
  • ownership stake in one onshore refined product pipeline system
  • ownership stake in one onshore diluent pipeline system

The offshore system includes:

  • stakes in four offshore crude oil pipeline systems
  • stake in one offshore natural gas pipeline system

BP has vast midstream assets in the US, including an extensive network of pipelines and terminals. The company plans to utilize some of these assets to raise funds. BP has formed BP Midstream Partners LP to own, operate, develop, and acquire BP’s midstream assets in the US.

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BP expects the IPO to hit the market in 4Q17, subject to market conditions. After the IPO, BP would own MLP’s general partner interests, its incentive distribution rights, and a large portion of its limited partner interests. The stock would trade under the ticker BPMP. Citigroup (C), Goldman Sachs (GS), and Morgan Stanley (MS) would be the book-running managers for the IPO.

Why an IPO over divestment?

In BP’s 2Q17 earnings conference call, analyst Anish Kapadia of Tudor, Pickering, Holt & Co. asked the company’s management why it chose an IPO rather than divesting the assets. 

BP’s group chief executive, Bob Dudley replied, “I think fundamentally, with respect to a sale versus an MLP, these are assets that are important to BP, to optimise our operations around the US, e.g. the pipelines, refining, and so by maintaining management interest in it, it is a lot better than just an outright sale, which could damage optimisation.”

Series outline

In this series, we’ll look at BP’s financial and market performance to determine its outlook in the near term. In the next few parts, we will review BP’s Upstream segment and earnings outlook. We’ll also look at analysts’ ratings and dividend outlook. 

We’ll also look at BP’s stock performance, price forecast based on implied volatility, changes in short interest, institutional holdings, and valuations. We’ll conclude by analyzing whether BP’s debt and liquidity position could improve.

In the next part, we’ll look at BP’s major Upstream segment projects.


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