Story by The Wall Street Journal
A week after the largest master limited partnership initial public offering on record, another energy MLP is set to test its luck in the public market, and seems on track to find eager buyers.
Antero Midstream Partners LP is expected to price its IPO Tuesday night. It hopes to sell 37.5 million shares at between $19 and $21, according to regulatory filings. At the midpoint, the deal will raise $750 million, making it the second-largest MLP IPO in 2014.
Antero Midstream, a partnership formed by Antero Resources Corp.AR -2.01%, owns pipelines and compressor stations in the core of the Marcellus Shale in northwest Virginia and Utica Shale in southern Ohio. The MLP provides midstream services to Antero Resources under a long-term, fixed-fee contract.
Antero Midstream’s IPO comes just a week after the highly-sought-after debut of Shell Midstream Partners, which priced above its expected range and sold more shares than planned. At $23 a share, Shell Midstream raised $1.058 billion making it the largest MLP IPO on record, according to Dealogic.
Like Shell Midstream, Antero Midstream possesses high-quality assets and a deep-pocketed parent company. Investors expect the MLP to post large distribution growth—some investors anticipate a compounded annual growth rate in the 30% range for distribution.
One portfolio manager said Tuesday he’s been told the deal is likely to price between $23 and $25 based on “investor demand.” A spokesman for Barclays BARC.LN -0.13%declined to comment.
Still, money managers are quick to point out Antero is a different beast.
While many MLPs, including Shell Midstream, have multiple customers using their infrastructure, and thus multiple revenue streams, Antero Midstream only has one: Antero Resources.
“Antero is in a great location and I see increasing demand for natural gas going forward,” said Michael Wright, senior analyst with San Francisco-based Forward Global Infrastructure Fund. “But you run the risk that if Antero pulls back on drilling there isn’t necessarily someone else who’s stepping up and filling the void in terms of growth.”
Shares of MLPs had a tough October, with declines driven by worries of falling commodity prices. Mid-month, as the cost of oil tumbled, the Alerian MLP exchange-traded fund tumbled 10% from its early September highs. Though it recovered most of its losses, there is lingering concern.
Similar to Shell Midstream, the yield for Antero is fairly low. At its midpoint, the yield on Antero’s shares is 3.4%. In contrast, the Alerian MLP Index was yielding 5.2% at the end of September. It remains above Shell’s yield at its IPO, which was the lowest-ever yield for an MLP at its IPO price, at 2.8%.
Antero Midstream plans to list its shares on the New York Stock Exchange under the symbol AM.
The deal is being led by Barclays PLC, Citigroup Inc.C -0.52%, Wells Fargo Securities,Credit Suisse CSGN.VX -1.24%, J.P. Morgan JPM -1.03% and Morgan Stanley MS -0.14%.
