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Shell's Midstream Assets in TX and LA (Gulf area)
11/18/2022
On July 25, Shell USA, Inc. and Shell Midstream Partners, LP (SHLX) signed an agreement and plan of merger.
The transaction was anticipated closing in the fourth quarter of this year, subject to customary closing conditions. A subsidiary of Shell USA, as the holder of a majority of the outstanding SHLX common units, has delivered its consent to approve the transaction concurrently with the execution of the Merger Agreement.
On October 19, Shell USA completed the almost $1.96 billion acquisition of the master limited partnership. The company paid $15.85 in cash for every common unit representing limited partner interests in SHLX not held by Shell USA or its affiliates. A subsidiary of Shell USA has 269,457,304 SHLX common units or roughly 68.5% of SHLX common units.
SHLX's assets include interests in entities that own crude oil and refined products pipelines and terminals that serve as key infrastructure to transport onshore and offshore crude oil production to U.S. Gulf Coast and Midwest refining markets. They convey refined products from those markets to major demand centers, as well as storage tanks and financing receivables that are secured by pipelines, storage tanks, docks, trucks, rail racks, and other infrastructure used to stage and transfer intermediate and finished products.
Shell Midstream commenced trading in October 2014 via an upsized initial public offering with a price, which was higher than predicted. The IPO rose $920 million before underwriters exercised their overallotment option, which ended up bringing the total to $1.06 billion.
After the MLP was created, Shell’s midstream assets lost billions of dollars worth. The MLP's assets included interests in entities that own crude oil and refined products pipelines and terminals in and around the Gulf Coast and Midwest regions and interests in entities that own natural gas and refinery gas pipelines in the Gulf Coast region.
In previous years, many U.S. pipeline companies had their subsidiaries structured in this popular for of the master limited partnership. Shell PLC effectively came to consolidate its MLPs in similar transactions being the latest in this among othe energy giants.
In December 2020, Calgary-based TC Energy Corp., formerly TransCanada, announced a roll-up to purchase the publicly held units of TC PipeLines LP in an all-stock deal, which was completed in March 2021.
San Ramon, California-based Chevron Corp., which has a significant presence in Houston, finished its acquisition of Houston-based Noble Midstream Partners LP in May 2021. Chevron had already inherited a majority stake in the MLP when it got Houston-based Noble Energy in 2020.
Most recently, Houston-based Phillips 66 bought all limited partnership interests in Phillips 66 Partners that it did not already own. That all-stock deal, which was estimated at $3.4 billion when it was announced in October 2021, closed on March 9, making the MLP a wholly-owned subsidiary of Phillips and simplifying the overall company governance and corporate structure.
Barclays Capital Inc. and Evercore Group L.L.C. acted as financial advisors to Shell USA; Baker Botts L.L.P. acted as Shell USA's legal counsel, and Richards, Layton & Finger, PA acted as special Delaware counsel to Shell USA on the Transaction. Intrepid Partners, LLC acted as financial advisor to the Conflicts Committee and Gibson, Dunn & Crutcher LLP acted as the Conflicts Committee's legal counsel on the Transaction.
For the Shell Midstream deal, Shell USA was represented by Barclays Capital Inc. and Evercore Group LLC as financial advisers, Baker Botts LLP as legal counsel, and Richards, Layton & Finger PA as special Delaware counsel. Intrepid Partners LLC acted as financial adviser to the conflicts committee, and Gibson, Dunn & Crutcher LLP acted as the conflicts committee's legal counsel.
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