The story is growth for midstream master limited partnerships, according to analysts following the sector. Credit Suisse reported from its 17th Annual Energy Summit held in mid-February in Vail, Colorado, that MLP growth prospects are “intact.” Five MLPs and three natural gas companies participated in the conference.
While noting the opportunities arising in the wake of unconventional-resource development, from the Marcellus to the Eagle Ford to the developing Niobrara action, the analysts said more deals may get done.
“MLPs are the logical buyers of midstream-asset sales by E&P and major oil companies.” They noted that Petrohawk Energy Corp., Southwestern Energy Co. and EQT Corp. are all contemplating further monetization of midstream holdings. Petrohawk could realize more than $1 billion from the sale of its midstream assets, including the 50% ownership of its Haynesville joint venture with Kinder Morgan.
Capex budgets for MLPs are expected to either hold strong or rise through the year, and the NGL outlook is similarly stable.
In one of the most recent planned transactions in the midstream, Magellan Midstream Partners announced it would acquire a full interest in the Cushing Storage joint venture, which would construct 4.25 million barrels of crude oil storage there. Magellan increased its 2011 capital spending estimate to $215 million from its previous estimate of $170 million for the acquisition cost and to fund the full project, noted UBS Securities analysts.
And both The Williams Companies and Marathon Oil are contemplating separating their downstream and upstream segments. Williams announced it will form a pure-play upstream E&P business via an initial public offering this year, spinning off its remaining midstream infrastructure and gas-pipeline assets. Inspired by the success of Kinder Morgan’s recent IPO, it will sell up to 20% of its exploration unit in an initial public offering, probably in the third quarter. The remainder will be spun off to Williams shareholders in 2012.
Marathon also announced plans to create pure plays of its downstream and upstream segments in 2011.
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