BP Eyes US Midstream IPO, But Not Sale of UK Fields

BP said July 18 it is evaluating the formation and initial public offering (IPO) of a master limited partnership (MLP) to enhance shareholder value and to support BP's strategy to grow its midstream business in the US.

Natural gas, crude oil and refined product pipelines in the US Midwest and Gulf Coast are assets that could initially be put into such an MLP, it said.

If BP determines to pursue the MLP IPO, an indirect wholly-owned subsidiary BP Midstream Partners would file a registration statement with the US Securities and Exchange Commission to initiate the regulatory process in 2H2017. If an IPO were completed, BP would own the MLP's general partner.

MLPs can have tax advantages to corporations and investors in the US. It might also encourage certain funds, which might not wish to invest in riskier upstream activities, to invest in the steadier returns associated with midstream activities.

BP's website says that its Chicago-based BP Pipelines (North America) midstream business owns and operates pipelines and terminals in the Lower 48 and US Gulf that transport over 1.3mn barrels [oil equivalent]/day of oil, refined products and natural gas through nearly 3,500 miles of pipelines.

BP denies scouting for UK E&P buyers

The July 18 statement came ahead of a July 20 Wall Street Journal article saying that BP had reportedly approached potential buyers, including private equity funds, to sound them out about its UK North Sea fields. 

Unusually though BP denied the WSJ report, telling NGW in a statement: "BP is committed to the UK North Sea and any rumours to the contrary are simply false. This year we completed a major redevelopment of Schiehallion area west of Shetland and are working to double production in the UK North Sea to 200,000 boe/d by 2020. Our aim is to sustain a material business in the region for decades to come."

BP itself last year bundled all its Norwegian E&P interests into a new partnership Aker BP -- but one that remains 30%-owned by BP.  

Rival Shell, in contrast, agreed the sale six months ago of several UK gas field assets for $3.8bn to UK-based independent Chrysaor which is supported by one such private equity fund; the deal was cleared by EU regulators last month and is expected to be wrapped up before year's end. It is also selling its Corrib field, off Ireland. Danish Dong in May announced the sale of its entire E&P to UK-based Ineos for $1.05bn more recently, while E.On has sold its upstream assets to Premier and OMV.

Mark Smedley