BP Files For IPO of Pipeline Assets

By Sarah Oliver,
Money and Investing Writer

The British oil and gas company, BP P.L.C (NYSE:BP), has recently announced that they filed for an initial public offering on the New York Stock Exchange. The subsidiary, BP Midstream Partners, planned an offering of $100 million on the New York Stock Exchange. This decision comes after a change in oil prices over the last few years as they begin to fall.

BP has also created this IPO in order to offset some of the financial effects of the Deepwater Horizon crisis in 2010.

After an explosion in the Gulf of Mexico, the company had to pay $5.5 billion in penalties against the Clean Water Act and $8.8 billion in damages to natural resources. During this catastrophic event, 11 people lost their lives and 4 million barrels of oil polluted the environment.

The United States government filed a complaint within the District Court against the company, along with several people believed to be held responsible for the accident. Following these events BP was forced to make financial decisions regarding their portfolio in the hopes of restoring some of their downfalls.

On September 11, 2017 BP Midstream Partners LP filed with the SEC to list this IPO. The entity will be listed as a Master Limited Partnership, or MLP for short.

The new listing on the New York Stock Exchange will be the symbol “BPMP.” In such a business venture there are the tax benefits of a partnership and the liquidity of a public company.

The distributions from the MLP are released usually on a quarterly basis, and the partners manage the day to day operations. This type of business venture is popular among businesses in the energy sector, specifically among pipelines.

While BP hopes that an MLP structure will attract more investors due to the tax advantages, despite the fact that rising interest rates increase the cost of borrowing.
BP has planned over the past two months their goal of spinning off some of their U.S pipeline assets. The company’s U.S. pipelines store 1.3 million barrels per day of oil throughout 3,500 miles. Investors such as Citigroup, Goldman Sachs, Morgan Stanley, Barclays, Credit Suisse, and JP Morgan have taken interest in the IPO.

BP hopes to follow the path of other energy companies who have seen success in listing pipeline assets. Royal Dutch Shell raised almost $1 billion in 2014 after spinning off their pipeline assets.

It is the hope of the oil company that this listing will help them raise cash to offset some of their financial problems. BP is still paying off debts from the Deepwater Horizon crisis 7 years ago, and will continue to pay these costs for a while.

After sitting on the idea to list U.S. pipelines for about five years, action has finally been taken as oil prices are projected to rise. Previously low oil prices caused them to halt this plan temporarily.

The appealing tax advantages of the MLP, and increase in prices should attract investors, and help the company to regain some financial stability.

 

A version of this article appeared in the Tuesday, September 26th print edition.

Contact Sarah at
sarah.oliver@student.shu.edu

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