Barclays Capital Inc. and Evercore Group LLC advised on the most corporate M&A deals in the North American energy pipeline sector in 2018, with Citigroup Global Markets Inc. and Goldman Sachs & Co. LLC trailing not far behind when it came to advising the most parties involved in buying, selling or standing up midstream companies.
Barclays and the Evercore Inc. subsidiary, which has been the adviser of choice for midstream energy companies that have decided to ditch their master limited partnerships, each advised on eight out of 25 announced corporate-level transactions that are in S&P Global Market Intelligence's North American coverage universe and included adviser information. Citigroup and Goldman Sachs advised seven parties apiece.
The majority of company-level M&A for the oil and gas pipeline industry in 2018, which exceeded $70 billion, involved internal reorganizations spurred by investors' frustration with the MLP model. Required cash payments to general partners, exacerbated by prohibitively high equity costs and stunted stock prices, prompted several partnerships to merge with their general partners, roll up into their parent corporations or become C corporations themselves.
Private-equity-backed companies also accounted for a significant number of those announced transactions, including EagleClaw Midstream Ventures LLC's deals to acquire Permian Basin rivals Caprock Midstream LLC and Pinnacle Midstream LLC, Global Infrastructure Partners' commitment to buy Devon Energy Corp.'s stakes in EnLink Midstream Partners LP and its affiliates, and ArcLight Capital Partners LLC's recent agreement to purchase TransMontaigne Partners LP.
Barclays and Evercore were on opposite sides of the Caprock and TransMontaigne deals, as well as Tallgrass Energy LP's and EnLink's corporate simplifications.
Barclays garnered $15 million in fees for advising Energy Transfer Partners LP when it merged with Energy Transfer Equity LP to form midstream behemoth Energy Transfer LP, a deal worth $26.55 billion. Morgan Stanley & Co. LLC hit paydirt working for Williams Cos. Inc. when it rolled up Williams Partners LP, earning the investment bank $12 million in fees.
There are several potential midstream M&A deals on the horizon for 2019 that could generate more income for top advisers. ArcLight made an unsolicited offer in September 2018 to purchase the common units it does not already own of American Midstream Partners LP after the partnership's failed merger with Southcross Energy Partners LP. Summit Midstream Partners LP, Targa Resources Corp. and SemGroup Corp. could also benefit from going private, CBRE Clarion Securities MLP expert Hinds Howard has said.
Midstream energy analysts at Stifel Nicolaus & Co. wrote in a Dec. 9 note to clients that they expect Phillips 66 to roll up Phillips 66 Partners LP as the MLP faces increasing pressure to shed its incentive distribution rights payments to the general partner. MPLX LP and Andeavor Logistics LP are also expected to merge.