A somewhat “Popeye-esque” transaction trend continues into 2014 as three companies with muscular market capitalization assert who they “yam” and move to shed assets not in alignment with that identity.

While Midstream Business cannot independently verify the role of spinach consumption in negotiations, what is clear is a general trend toward a laser beam focus:

• Shell ($234 billion market cap) agreed to sell its 8% equity interest in Western Australia’s big Wheatstone-Iago joint venture (JV) and 6.4% interest in the Wheatstone liquefied natural gas (LNG) to Kuwait Foreign
Petroleum Exploration Co. for $1.135 billion.
• Chevron ($215 billion market cap) seeks buyers for at least four natural gas and crude oil pipeline operations in Texas and Louisiana with a combined asking price of more than $1 billion.
• TransCanada Corp. ($34 billion market cap) reached an agreement to sell its Cancarb Ltd. carbon black unit and its related power generation facility to Tokyo-based Tokai Carbon Co. Ltd. for aggregate gross proceeds of $190 million. The transaction is expected to close late in the first quarter.

This follows a pattern that PricewaterhouseCoopers (PwC) identifies in its analysis of 2013 oil and gas industry merger and acquisition activity.

“Financial investor buyers added more midstream and oilfield services as corporate owners refocus on core operations,” says Rob McCeney, PwC’s U.S. energy and infrastructure deals partner.

Shoring up the core is not restricted to the giants. QEP Resources, under pressure from activist investor Jana Partners, authorized the spin-off of its midstream business, QEP Field Services Co., into a stand-alone firm. QEP had previously agreed to a master limited partnership (MLP) of its midstream operations, but the arrangement failed to satisfy Jana Partners, a hedge fund that wanted a full separation.

Look for MLPs to be strong to the finish in 2014. They accounted for 30% of all deal activity in 2013, according to PwC, and their strong yields and efficient tax structures will continue to attract investors, says Doug Meier, the U.S. energy sector deals leader. “However,” he adds, “the pressures on MLPs to keep cash flows high and bring in new assets will keep these operators on the lookout for more acquisitions, including new dropdowns in the midstream space.”

Joseph Markman can be reached at jmarkman@hartenergy.com or 713-260-5208.

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