The story of the week was natural gas dropping 14.4%. That, combined with almost $900 million in equity issued by MLPs, helped keep MLPs down relative to stocks. Variable distribution MLPs, particularly fertilizer MLPs had a good relative week, particularly RNF (up 5.1%), which benefits from lower natural gas prices as its primary raw material cost.
That drop in natural gas hasn’t helped the retail propane MLPs, which already had plenty of fundamental weaknesses trending against them. Propane MLPs were already facing conservation and declining demand from switching to natural gas, plus warmer 4Q weather. Weak natural gas prices would seem to have a further negative impact on propane demand. $APU and $FGP were the biggest losers in propane this week. $CMLP issued $107mm of equity, which helped it earn a spot on the loser list this week, down 6.5%. $PAA and $MMP also make the list, as we are seeing further rotation out of large cap MLPs that had great 2011’s. Royalty trusts had a rough week with the declines in commodity prices, but noticeably absent from the bottom 5 below are the E&P MLPs, which held up ok this week, even with a massive equity deal out of $LINE.
The winners were all not members of the Alerian MLP Index, which is a continuing trend as investors appear to be finding value in the MLPs that did not benefit from the surge in MLP ETF money in 2011. CPLP was the bright spot this week, after an upgrade from Wells Fargo on Monday, and a positive press release this morning on extension of charter agreements.
Year to Date
MLPs are off to an uncharacteristic slow start to the year, but variable distribution MLPs and GPs are doing well so far.
Small caps continue to outperform, large caps (with refined product and crude assets it appears) are lagging, along with propane, as mentioned above.
My week thoughts post will be out later this weekend. Enjoy the holiday.