The Newest Midstream IPO: Summit Midstream Partners

The latest midstream company to list on the New York Stock Exchange is Summit Midstream Partners (NYSE: SMLP  ) . Debuting Friday, Summit is now one of the many master limited partnership, or MLP, options for dividend investors in the midstream industry.

The business
Summit Midstream has been in business since 2009, when CEO Steve Newby and Energy Capital Partners formed the partnership. GE Financial Services also has a stake in the company.

Based in Dallas, its assets are in shale plays in Texas, Colorado, and Utah. Summit's operations focus on the gathering, compression, and dehydration of natural gas. Big name customers include Chesapeake Energy (NYSE: CHK  ) and Encana (NYSE: ECA  ) .

Though revenue was up 81% halfway through this year to $75.9 million, profit was down $1.2 million compared to the same period last year, coming in at $16.7 million.

The IPO
Units in Summit Midstream opened up at $21 and were up slightly halfway through its first trading day. Summit plans to sell 12.5 million shares, for a total of $250 million. If an overallotment of shares is exercised, the deal could bring in up to $287 million. The partnership plans to spend the IPO funds on corporate needs and repaying its revolving credit facility.

Summit anticipates an annualized distribution of $1.60 per unit, paying $0.40 quarterly, roughly a 7% yield.

This is a relatively small midstream company with really only two asset systems in place right now. However, there is plenty of room to grow in this industry. It is also worth noting that other small energy MLPs going public this year, Northern Tier Energy (NYSE: NTI  ) and Hi-Crush Partners (NYSE: HCLP  ) have performed quite well, as far as share price is concerned.

Foolish takeaway
MLPs are favored by income investors for their high yields, and don't typically experience the pop-and-drop that affects other IPOs. That being said, there are so many compelling midstream investment opportunities right now that waiting a quarter or two before jumping into this one seems more than reasonable.

Fool contributor Aimee Duffy holds no position in any company mentioned. Click here to see her holdings and a short bio. If you have the energy, check out what she's keeping an eye on by following her on Twitter, where she goes by @TMFDuffy.

The Motley Fool owns shares of Hi-Crush Partners. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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