? The market tends to lump MLPs together, but Shell Midstream's biggest advantage is Shell.
? Because of energy tech advancement, "things that were once believed to be impossible that are now possible."
Shell Midstream Partners LP CEO John Hollowell will retire from a 38-year career with Royal Dutch Shell PLC when he steps down from the helm of the energy pipeline master limited partnership at the end of March. Hollowell began his CEO tenure in July 2015, just after a 2014 initial public offering that transformed Shell's midstream assets into the first MLP to come from the integrated oil and gas space. S&P Global Market Intelligence spoke with Hollowell about his experiences throughout the oil and gas value chain and Shell Midstream's future. The following is an edited transcript of that conversation.
Shell Midstream Partners CEO John Hollowell said master limited partnerships in the midstream energy sector "tend to get painted with a pretty broad brush." |
S&P Global Market Intelligence: You entered the MLP market in late 2014 when MLPs were struggling. A lot has changed after the oil price collapse, including a trend toward simplification and retaining more cash flows. Can you reflect on Shell Midstream's time as an MLP and what you see happening in the sector right now?
John Hollowell:
We're in this situation because we've actually grown the business pretty quickly. Every one of our transactions has been accretive to the unit holders, so we've provided growth and the [general partner] has certainly enjoyed a portion of that. … We have to be mindful of how and when we handle [IDRs].
If I compare the performance of Shell Midstream Partners versus the [Alerian Master Limited Partnership Index], which we're part of, we've outperformed ... some 30% since we IPO'd Shell Midstream Partners. I have a view that it's because of the strength of our sponsors and the quality of assets we've brought to the table and how we've introduced them to the market. … I think the strong MLPs will find ways to continue to generate value through those turbulent times, and I think the market and appetite for MLPs will still be there, albeit at a bit of a more volatile setting than it was in the past.
Some midstream companies have expressed concerns that a 25% federal tariff on imported steel could hurt project backlogs. What kind of impact would such a tariff have on Shell Midstream?
We're fortunate to be able to have an attractive investment environment here in the U.S., and I certainly hope it stays that way, and Shell’s a big company with a lot of opportunities around the world. … We certainly would like to keep it simple if we can, but we're watching closely to see where the tariffs may impact us going forward.
You've been at Shell for 38 years. What is the biggest shift you have seen in the global oil and gas industry during your time with the company?
Over the last 40 years, I've seen these cycles of high oil prices and low oil prices and how we've handled those … and how the industry's been able to be resilient, to be able to find ways to remain relevant and profitable during those swings. … I think it comes down to how industry has used technology and innovation through the cycles to help generate value. … You're chasing the ultra-deepwater or you're chasing these shales in the Permian or Eagle Ford or wherever, the technology and innovation required to unlock those are things that were once believed to be impossible that are now possible.
It's really also the determination and will to make that technology work. I think that gets lost.
Shell Midstream is the first MLP to come from the integrated oil and gas space. BP Midstream Partners LP followed in 2017. Why did Shell spin out this part of its portfolio, and has it served its desired purpose?
In 2014, when we took the decision to IPO Shell Midstream Partners, we really saw the opportunity that we had to take this large midstream infrastructure and combine it with a proven financial structure, the MLP. … And the two of them together can really create value for investors in the MLP and more value for Shell. We're encouraged by the performance of the MLP since we launched it.
We certainly delivered more than what we promised internally to Shell. … We've grown our distributions in the first three years by over 100%. We've been busy building scale for the MLP through acquisitions of Shell assets, as well as third-party acquisitions, and we've achieved about $4 billion of acquisitions … and we've been fortunate to be able to focus our acquisitions in a space we call the 'mainstream midstream.' These are assets that have really strong, stable cash flows that are underpinned by long-term contracts with very reliable customers, all things that are attractive to the MLP sector.
We saw an opportunity, it's exceeded our expectations, and I think Shell Midstream Partners is off to a great start.
What do you see as Shell Midstream's biggest strengths and challenges?
I think, without a doubt, Shell Midstream Partners' biggest strength is our sponsorship, and really how that plays into our strategy. It provides us with a very resilient framework. … Their commitment and financial strength certainly helps us as an MLP, also their continued investment in this part of the world. … At the end of the day, what separates us, I think, from other MLPs is all those threads flow back through our sponsor Royal Dutch Shell, and we have an unmatched portfolio and runway of assets.
There's no doubt that the current markets are challenging, I don't deny that. I think really for us, what we've learned over the last three years … MLPs in general tend to get painted with a pretty broad brush. I think the challenge for us, or the opportunity for us, is to continue to demonstrate and emphasize a bit how Shell Midstream is different from other MLPs … to get people to recognize the differences that we see.

