CONSOL Energy Inc. and its Marcellus Shale joint venture partner, Noble Energy, Inc., intend to form a master limited partnership (MLP) to provide midstream gathering services for production from their jointly owned acreage in the Marcellus Shale.
Master limited partnerships (MLPs) – which have become the financial structure of choice for energy midstream companies – is a limited partnership that is publicly traded on a securities exchange. The advantage of an MLP is that it combines the tax benefits of a limited partnership (the partnership does not pay taxes from the profit – the money is only taxed when unitholders receive distributions) with the liquidity of a publicly traded company.
The two companies have submitted a confidential draft Registration Statement to the U.S. Securities and Exchange Commission relating to a proposed initial public offering of common units of an MLP. Once the offering is completed, the MLP will own, operate, and develop Noble Energy’s and CONSOL’s jointly-owned natural gas midstream assets in the Marcellus Shale.
CONSOL and Noble Energy’s 50/50 joint venture, CONE Gathering LLC, is expected to own the general partner of the MLP, which would retain incentive distribution rights and a majority of the MLP’s common units.
The number of common units to be offered and the price range for the offering will be determined prior to the commencement of the offering, which would occur following the review period with the U.S. Securities and Exchange Commission. A decision to proceed with this potential offering will be subject to an assessment of various market and other conditions, as well as authorization from the Board of Directors of Noble Energy.
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