Noble Energy said Thursday it will take its midstream company public, as the beleaguered driller looks for new ways to fund the pipelines that support its drilling.
The new company, Noble Midstream Partners, will own crude oil, natural gas and water infrastructure in the Colorado DJ Basin. Noble Energy, the upstream parent, owns about 500,000 acres in that play and produced a daily average of 115,000 barrels of oil equivalent in the early third quarter.
Noble didn’t specify the number of shares it’s looking to sell, but did say that its target is about $100 million. The shares will trade under the symbol NBLX.
As falling oil prices have left many oil and gas producers straining for cash, many have pursued similar deals to monetize their midstream infrastructure. Many producers own large networks of pipelines they built over the past decade to support shale drilling in remote regions.
In December of 2014, oil supermajor Royal Dutch Shell undertook a similar offering when it spun a number of its pipelines into Shell Midstream Partners. That offering was a runaway success and raised Shell $920 million it could then devote into maintaining and expanding its midstream network through the new venture.
Noble’s offering, however, is a much smaller scale undertaking and comes after midstream stocks have fallen more than 20 percent so far in 2015. The markets have fallen so far that many midstream companies, such as Houston pipeline giant Kinder Morgan, have sworn off selling stock to raise money, saying offering shares for prices this low isn’t worth it in the long run.
Noble Energy declined to comment on the IPO.
Investors typically value midstream companies based on their ability to pay a growing dividend into the future. Funding that dividend requires growth and an expanding network of infrastructure. Accordingly, a large part of Noble Midstream Partners will depend on its largest customer’s — Noble Energy’s — ability to continue pulling more oil and gas from its wells in the DJ Basin.
At a Barclays industry conference in September, Noble said it has at least three new infrastructure projects planned for the region through 2017. Those projects could be sold to into the partnership and provide a way for it to grow payouts to investors. However, Noble has also made significant cuts to its capital budget as prices have fallen, meaning it isn’t likely to drill at the pace it was before the shale bust.
Barclays, Baird and J.P. Morgan are acting as book-running managers of the offering.
