NEW YORK (TheStreet) -- On Wednesday, Hess (HES) revealed its subsidiary Hess Midstream Partners has filed for a $250 million initial public offering with the Securities and Exchange Commission. This could be great news for shareholders.
Structured as a master limited partnership, or MLP, the offering "will create value" for Hess's shareholders, Fadel Gheit, senior analyst at Oppenheimer, told TheStreet through an email.
In a press release, the company said Hess Midstream Partners will partly own a natural gas processing plant and the associated railroad terminal as well as a crude oil truck and pipeline terminal in North Dakota and a storage and transloading facility in Minnesota. The new company will start trading at the New York Stock Exchange under ticker HESM from the first quarter of 2015.
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Brian Youngberg, senior energy analyst at Edward Jones, told TheStreet in an email that the markets have been expecting this for the last couple of months and its impact is already priced into Hess' shares. The stock has climbed almost 15% for the year to date, currently trading near $95.
With the spinoff, Hess will monetize the MLP's assets while delivering a tax advantage to its shareholders. Gheit explained that a MLP is "more tax efficient and reduces the cost of capital to acquire and grow the midstream assets."
An MLP pays cash distributions to its investors in place of dividends. Investors get a yield similar to a dividend but the tax structure is different and seen as more favorable.