Noble Midstream Partners, LP (NYSE:NBLX): Buying Opportunity
The quiet period for the Noble Midstream Partners, LP’s IPO will expire on Oct. 9, 2016, allowing underwriters to release their detailed analyses and reports on Oct. 10. The underwriters include: Barclays, Baird, J.P. Morgan, BofA Merrill Lynch, Citi, Deutsche Bank, DNB Markets, Mizuho Securities, Mitsubishi, Wells Fargo, BB&T Capital Markets, BNP Paribas, CIBC, Fifth Third Securities, PNC Capital Markets, Scotiabank/Howard Weil, Societe Generale, SMBC Nikko, TD Securities.
These underwriters are very influential, and their reports may result in a temporary increase in NBLX’s share price.
At DRD Investments, our research has found significant potential for above-market returns in the five days prior to and two days after the conclusion of a company’s quiet period.
Business overview: Contract services provider for the oil and gas industry
Based in Houston, Texas, Noble Midstream Partners, LP (NYSE:NBLX) (1) provides a variety of services by contract to the oil and gas industry. Its primary customer is Noble Energy (NYSE:NBL). The company provides water, oil and gas services to Noble, and it acquires, develops, owns and operates oil and gas infrastructure assets. The company primarily focuses on the Delaware Basin in Texas and the Denver-Julesburg Basin in Colorado.
Management team highlights
CEO Terry R. Gerhart (2) has more than 31 years of oil and gas industry experience. Before joining Noble Midstream Partners as its director and CEO in Oct. 2015, Gerhart worked in a variety of different executive roles at Noble. Gerhart purchased 15,000 shares of NBLX on Sept. 20 at a per-share cost of $22.50.
John F. Bookout IV (3) is the CFO of Noble Midstream GP and a general partner of Noble Midstream Partners LLP, serving in that role since Oct. 2015. Bookout’s responsibilities include acquisitions, mergers and financial management. Before joining Noble in 2014, Bookout worked as an associate at Global Infrastructure Partners from 2009 until 2014.
The company notes that since it primarily provides midstream services to Noble, it doesn’t have any true competitors for the provision of services to its parent company. It does, however, have strong competition in the oil and gas industry for expansion of its services and assets through acquisitions. NBLX’s price-to-book of 4.1 is slightly above the industry average of 2.3; although this grouping includes many larger peers. Smaller peer Tallgrass Energy Partners (NYSE:TEP) has a P/B of 2.1.
Noble Midstream Partners LP derives almost all of its revenue from its contract with Noble. If Noble decides to change the manner in which it does its own business, NBLX could sustain substantial damage. As of June 30, 2016, the company reports that it had $293,367,000 in assets and a net income of $27,945,000 for the six months that ended on June 30. As of Sept. 28 during midday, its shares were trading at $27.54. It priced its shares at $22.50, which was above its stated range.
Early Market Performance
Since its IPO, Noble Midstream Partners LP is up approximately 23.6%. The company went public on September 14, 2016 at a price of $22.50. The stock finished the first day of trading at $26.19, up 16.4%. It rose another 6.2% in aftermarket return. Since then, the stock price has steadily risen. As of Thursday (9.29), the stock was trading at $27.61.
Conclusion: Excellent Time To Buy
Noble Midstream Partners, LP (NYSE:NBLX) has performed well since its IPO, and we expect this trend to continue in the near future.
NBLX is backed by a long list of highly followed underwriters, and the conclusion of its quiet period is likely to result in many detailed positive reports that could lead to a further boost in stock price. Our research has found this to be ~3%.
Some investors still view MLPs as risky in the long term. However, we recommend investors who are looking for a short-term buying opportunity to consider purchasing NBLX shares before the quiet period expiration on October 9.
Disclosure: I am/we are long NBLX.
Note: This article is written by Don Dion. Visit his site at DRD Investments for expert analysis on current and upcoming IPOs.