Will This Be 2014's First MLP IPO?

Last week, the board of directors behind the newly formed Enable Midstream Partners announced that the partnership had successfully tapped Lynn Bourdon III to serve as president and CEO. The appointment comes in advance of Enable Midstream's IPO, which is expected some time in the next few months. With that in mind, let's take a closer look.

Management counts 
First and foremost, Lynn Bourdon takes the reins at Enable after spending the last decade at Enterprise Products Partners (NYSE: EPD  ) . Enterprise is one of the best run, most reliable MLPs on the market today, and it's no surprise that its executives are in demand.

Bob Phillips, the current CEO of Crestwood Midstream Partners (NYSE: CMLP  ) , is another example of an Enterprise Products Partners alum making things happen in the midstream world. Phillips' MLP was all over the news in the last quarter of the year, signing big deals to drive the growth of its free cash flow as it pursues an investment-grade rating. Again, Enterprise is one of only two MLPs with a BBB+ credit rating from Standard and Poor's. In other words, if you're looking for an MLP model, Enterprise Products Partners is it.

More significant, in the case of Enable midstream, is Bourdon's specific expertise at Enterprise. He was the group senior vice president for natural gas liquids, natural gas marketing, petrochemical, refined products, and marine services. It's tremendous exposure and should serve him well in his new role at Enable Midstream, given its asset footprint.

The assets 
The partnership has gathering and processing assets in four U.S. basins, exploiting the recent boom in domestic shale drilling. Enable is active in the Granite Wash and the Haynesville, Bakken, and Fayatteville shale plays, among others.

The partnership has 11,000 miles of natural gas gathering pipeline, and 11 natural gas liquids processing plants with a combined capacity of 1.9 billion cubic feet per day. Its biggest footprint is located in the Oklahoma/Texas panhandle region, where it serves more than 200 producers across six plays with 6,550 miles of pipeline and eight processing plants. Its 10 biggest customers, including the likes of Encana, ExxonMobil, and Chesapeake, account for 75% of its revenue.

It is important to note that 60% of the Enable's revenue is fee-based, while the remaining 40% is commodity based. That is not great, but it is certainly not unusual to see at a gathering and processing partnership. Access Midstream Partners (NYSE: ACMP  ) remains the G&P to beat here, deriving 100% of its revenue from fee-based contracts.

Finally, though the majority of its gathering assets target natural gas and NGLs, Enable is ramping up its crude gathering presence in the Williston Basin. Its new gathering system there has a planned capacity of 19,500 barrels per day, and is contracted through to 2028.

Bottom line
In November, Enable announced it plans to raise up to $500 million at IPO sometime in 2014. Considering his background in NGLs and natural gas marketing, new CEO Lynn Bourdon is an excellent pick to lead the partnership going forward. Bourdon has observed firsthand how an MLP with commodity risk navigates the world of reliable distributions, and that experience will matter, given the breakdown of fee-based to margin-based revenue at Enable Midstream.

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