Devon Midstream Partners LP is one step closer to market.
The Devon Energy Corp. spinoff on Friday filed a registration statement with the U.S. Securities and Exchange Commission, setting the stage for an upcoming initial public offering.
Devon raised the prospect of creating a master limited partnership for its pipeline assets during its fourth-quarter earnings call in February. CEO John Richels said the move would monetize assets whose value the company believes are not reflected properly in Devon's stock price.
Devon considered forming a master limited partnership in 2007, but concluded the timing was not right.
The partnership will seek to list its common units on the New York Stock Exchange under the symbol “DVNM.”
Devon hopes to raise as much as $400 million in the offering, which could occur in the next few months after the registration statement is approved by the SEC.
Analysts at Oppenheimer and Co. Inc. in New York estimate Devon would have to sell about a third of the limited partner units in the new midstream partnership to reach that threshold.
“Although this was expected, we believe it could be one of the catalysts needed to improve the company's valuation,” according to Friday morning's note to clients. “We think this action is a step in the right direction.”
DVNM will have no employees. It will be operated by the officers and board of its general partner, Devon Midstream Holdings.
Devon's domestic midstream operations are the largest among U.S. independent producers, with more than 6,500 miles of pipelines, 300 compressor units and eight gas processing plants with net inlet capacity of nearly 1.2 billion cubic feet per day, according to the company's website.
Devon Midstream's initial asset will be a 20 percent interest in its parent company's U.S. midstream holdings, although it expects to acquire a larger stake in its general partner over time, according to Friday's registration statement.
The setup is expected to benefit investors.
“This simplified MLP structure allows the company to drive long-term distribution growth through increased ownership in this holding company, rather than individual asset drop-downs,” Oppenheimer wrote.
Other Oklahoma energy producers — including the Williams Cos. Inc., ONEOK Inc. and Chesapeake Energy Corp. — have launched master limited partnerships.
Chesapeake created a midstream partnership in 2009, when it sold a 50 percent stake to a New York-based private equity firm for nearly $600 million. Last year, Chesapeake sold its remaining stake in Chesapeake Midstream Partners for about $1.3 billion.