Inergy Midstream, L.P. (NRGM) has priced its public offering of 11 million units representing limited partner interests. The price of a unit is fixed at $22.50 and the public offer is expected to close on Sep 13, 2013 subject to customary closing conditions.
The partnership will allow the underwriters of the issue a window of 30 days to purchase up to 1.65 million additional common units to cover over-allotments, if necessary. The units will be offered in accordance to the shelf prospectus previously filed with the Securities and Exchange Commission.
Inergy Midstream intends to utilize the net proceeds of the issue, including proceeds from any exercise of the over-allotment option, to repay outstanding borrowings under its credit facilities. Moreover, the partnership intends to utilize the remaining proceeds for its ongoing midstream expansion projects and for general partnership purposes.
Inergy Midstream’s performance has come in below market expectation, with the partnership posting negative earnings surprise in the last four quarters. Recently, the partnership has taken an initiative to jointly own a crude oil rail terminal with Enserco Midstream, LLC. A portion of the net proceeds from the issue will be invested in this joint venture.
This midstream project is located near the resource rich Powder River Basin. This terminal will currently have a throughput capacity of 20,000 barrels per day, which can be expanded to 60,000 barrels per day to meet increasing demand.
Inergy Midstream ended fiscal third quarter 2013 with nearly 85.92 million of outstanding units. The partnership presently distributes $1.60 per unit to unitholders on an annualized basis. The contribution from this new midstream project is expected to improve the performance of the partnership and generate additional cash flows, which could then be distributed among unitholders.
Inergy Midstream, L.P. currently has a Zacks Rank #5 (Strong Buy). However, other operators in the sector having a favorable Zacks Rank are Magellan Midstream Partners L.P. (MMP), Delek Logistics Partners, L.P. (DKL) and ONEOK Partners, L.P. (OKS). Magellan Midstream Partners has a Zacks Rank #1 (Strong Buy) while Delek Logistics Partners and ONEOK Partners retain a Zacks Rank #2 (Buy).