© 2017 The Texas Lawbook.
By Natalie Posgate
(April 12) – Houston Lawyers at Latham & Watkins, Andrews Kurth Kenyon and Vinson & Elkins likely had no case of the Monday blues after closing an initial public offering that they began working on nearly three years ago.
It wasn’t just any IPO either; it was for Houston-based Hess Midstream Partners, the only midstream master limited partnership besides Noble Midstream Partners to successfully close an IPO since 2015, and only one of three MLP IPOs in general to close in the past year. (The other was Kimbell Royalty Partners, a mineral and royalty interest-focused company that closed an IPO in January).
Hess Midstream initially filed for its IPO in September 2014, but the drop in oil prices set its plans back. It never withdrew its IPO filing, however, so once commodity prices appeared stabilized, Hess Midstream launched the IPO in late March of this year.
“It’s the longest [IPO] I’ve been involved with that stayed in registration,” said Andrews Kurth Kenyon partner Mike O’Leary, who led the underwriters’ involvement in Hess Midstream’s IPO. “I think they were just optimistic that conditions would improve and the quality of their assets were good. They were continuing to invest money in their upstream properties, which continued to create demand for the midstream partnership and had value where the market improved and investors were willing to come back in the space.”
Latham & Watkins partners Thomas Brandt and Bill Finnegan, who led the IPO for Hess Midstream, have also been involved since the original 2014 filing. So has Vinson & Elkins partner Ryan Carney, who advised Hess Midstream on income tax matters related to the IPO.
Hess Midstream’s IPO marks a feat as oil companies continue to recover from the downturn. Two years ago, energy companies and their lawyers were in a capital markets frenzy, rushing to the investment bankers to raise as much cash possible through equity offerings, debt offerings and IPOs. Some companies issued different types of offerings within days of each other.
That all stopped around July 2015 as the downturn dragged on. Securities offerings slowly came back in the second half of last year, but IPOs of all kinds of energy companies are still lagging behind on reaching recovery.
But maybe not for much longer, according to O’Leary. His sources tell him somewhere between 16 and 21 oilfield service companies are talking about doing IPOs, albeit some are intended as stalking horse bids for M&A deals.
“I don’t expect we’ll see 20 oilfield services IPOs successfully get done, as some of those companies will likely get acquired, but it’s interesting to see that the investment bank community appears to think there is sufficient investor demand for those companies,” O’Leary said.
Latham’s deal team also included capital markets associates Carolyn Check, Jayne Wabeke, Thomas Verity, Corey Allen and A.J. Million. Environmental partner Joel Mack was also involved, as well as lawyers in the firm’s Washington, D.C. office who handled compensation/benefits and regulatory matters.
Corporate partner Stephanie Beauvais also played a significant role on the Andrews Kurth Kenyon deal team, as well as corporate associates Phil Haines, Brooke Milbauer, and Paul Knowlton. In addition, partners Tom Ford and Angela Richards and associate Jocelyn Tau provided tax advice; Austin partner Lisa Shelton provided environmental advice; partner O’Banion Williams and associate Elizabeth Cone provided real property advice; and partnr Charlie Ofner and associate Shen Wang provided oil & gas advice. The firm’s Washington, D.C. office worked on regulatory matters.
The underwriter group was led by Goldman Sachs and Morgan Stanley, and also included Citigroup, J.P. Morgan, MUFG Securities Americas, Wells Fargo, ING Financial Markets, Scotia Capital (USA), SMBC Nikko Securities America, Barclays, HSBC and TD Securities (USA).
A partner in V&E’s Washington, D.C. office was on the income tax advisory team with Carney.
The IPO priced on March 27 and closed for $391 million, an upsized amount from what Hess Midstream originally announced it would offer at pricing. It ended up offering 14.78 million common units for $23 per share, when originally it said it would offer 12.5 million units for $19 to $21 per share. The underwriters also exercised in full an option to purchase an additional 2.2 million units.
As of closing, the public holds an approximate 30.5 percent limited partner interest in the company.
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