Oil and gas play, Devon Energy Corporation’s (DVN - Analyst Report) board of directors gave the go-ahead for the creation of a publicly traded midstream master limited partnership (MLP). The company intends to file a registration statement with the Securities and Exchange Commission in the third quarter of 2013 followed by the issuance of partnership units.
The new partnership will run the natural gas gathering and processing business and also manage the properties situated in the states of Oklahoma, Texas and Wyoming. Devon Energy will be the general partner of the midstream entity and have the entire incentive distribution rights.
Further, with the conclusion of the offering, Devon Energy will hold the lion’s share of the common units. Devon plans to use the proceeds from the sale of the MLP units to finance its continuing operations. This will render the MLP as a minority owner in Devon’s U.S. midstream business.
Of late, the shift towards unconventional resources like shale gas and oil sands, in North America, has led to the demand for greater investments in pipeline systems. The new MLP could not have come at a better time, with midstream opportunities gaining traction in the country after a weak performance in the fourth quarter 2012. Moreover, prospects from the international market look promising.
As per the Energy Information Administration (EIA), imports from Canada are projected to fall while pipeline exports to Mexico will receive a substantial boost in the coming years. This will certainly bode well for the MLP business and help accelerate Devon Energy’s future growth trajectory.
Nevertheless, the contracting coal-to-gas switch in the U.S. might be a cause of concern. Currently, Devon Energy carries a Zacks Rank #3 (Hold).
However, other oil and gas operators well-positioned in the energy domain are Zacks Ranked #2 (Buy) Anadarko Petroleum Corporation (APC - Analyst Report) , Encana Corp. (ECA - Analyst Report) and Oasis Petroleum Inc. (OAS - Snapshot Report) .
Based in Oklahoma City, Okla., Devon Energy is an independent energy company and engages primarily in exploration, development, and production of oil, natural gas, and natural gas liquids.