Hess Corp. (NYSE: HES), the New York-based oil producer, will form a tax-advantaged MLP to hold its pipelines, trucking, storage and processing facilities in North Dakota’s booming Bakken Shale region.
The company expects to make an IPO of common units in the partnership in the first quarter of 2015, Hess said in a statement July 30. Hess will continue to control the assets by owning the general partner of the new entity after the IPO.
Hess has sold or agreed to sell about $10.5 billion of assets, including its U.S. retail gasoline stations, to focus on exploration and production after a proxy fight last year with activist investor Elliott Management Corp. The company agreed to “monetize” its Bakken assets in a settlement with its largest investor.
Creating a partnership for the unit would reduce the tax burden for the assets, since MLPs don’t pay federal income tax. Hess is the latest to propose forming such a partnership, as companies seek ways to cut the 35% corporate U.S. tax rate.
The new partnership will include a natural gas processing plant in Tioga, N.D., as well as railcars and a loading facility for transporting oil from the region. It will also have a propane facility in Mentor, Minn.
Production from its Bakken fields in North Dakota rose 25% to the equivalent of 80,000 barrels of oil per day in the second quarter, Hess said July 30 in a separate statement.
On that day, the company reported adjusted per-share profit that exceeded analysts’ estimates. Hess rose 5.6% to $104.94 at 8:27 a.m., before the start of regular trading in New York.
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