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IPO Analysis: Hess Midstream Partners LP (NYSE: HESM)

By Roger S. Conrad on Nov. 19, 2014

Hess Corp (NYSE: HES) last month closed the sale of $860 million in liquids terminals and related assets to MLP Portfolio holding Buckeye Partners LP (NYSE: BPL) as part of the company’s effort to monetize its midstream assets and unlock shareholder value.

The proposed initial public offering of Hess Midstream Partners LP (NYSE: HESM) will monetize Hess Corp’s processing, transportation and terminal assets in North Dakota’s Bakken Shale, a prolific oil-producing play.

The MLP’s initial assets will include a 30 percent economic interest in the Tioga gas-processing plant, a 50 percent interest in an associated rail terminal that transports crude oil and natural gas liquids (NGL) and nine 104-railcar unit trains.

An agreement to supply Nova Chemicals’ petrochemical operations with ethane produced at Hess Midstream Partners’ Tioga processing plant should also bolster Hess Corp’s price realizations relative to its peers.

Hess Midstream Partners will also own a 50 percent stake in the Ramberg truck facility that receives crude oil for shipment via pipeline to the Tioga rail terminal and 100 percent of a propane storage facility in Mentor, Minnesota.

Through January 2024, the partnership will have the right of first refusal to acquire the remaining stakes in the aforementioned assets and Hess Corp’s oil- and gas-gathering pipeline systems in the Bakken Shale.

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