Today was the worst single day drop for the MLP Index since September 22, 2011, and this week was the worst weekly price change since first week of August 2011 when MLP Index was down 6.2%.  The chart below shows this week’s price action for the Index and the S&P 500.  Correlation looks pretty strong, which is a phenomenon I’ve written about before (like here), how MLPs are uncorrelated with stocks over long time periods, but short term market volatility has had an increasingly correlated effect on MLPs as vehicles for MLP investment (funds) have multiplied.  The theory being that funds have simpler tax consequences upon sale, so its easier to jump in and out of MLPs via funds than ever before.

This week’s 5.3% drop was the worst week of the year so far for the Alerian MLP Index.  It was also the 12th worst week in the last 10 years, in terms of total return.  Taking out the extreme volatility of late 2008 and early 2009, this week would have cracked the top 5.  And there weren’t even any equity offerings or ex-dates this week…so, not great.  Good news is that usually the index bounces back the following week, but when it doesn’t its usually very ugly.   Other silver lining is the index usually bounces back faster and higher than the broader market (as in 2009, and late 2011).

I read somewhere (and am too lazy to find the reference or substantiate what I’m about to write with back up) that investors in the U.S. have been pulling money out of equities and that this year’s strength for stocks was the result of fund inflows from foreign investors.  That would explain why MLPs have struggled relative to stocks year to date, given that MLPs are pretty difficult for international investors to invest in, unless its through ETFs or other funds.  But who cares now, because no one is buying U.S. stocks since May started…

Winners & Losers

Only 4 MLPs had positive weeks, and CPNO and RNO had their 2nd straight weeks with a double digit percent drop…note the chart below excludes the 5 variable distribution MLPs.

MLP Index dropped 5.3% this week, roughly inline with oil and with the S&P 500.  Variable distribution MLPs were crushed, in particular TNH (-14.4%) and recently IPOed PDH (-11.2%).  XTXI led the GPs lower with a 14.4% decline, ETE (-9.7%) not much better.  Somehow, amid all of this risking off, natural gas had another very sharp uptick in price week over week (+9.2%) on hopes of warmer than average weather this summer.

Year to Date

The gap between the year to date winners and losers narrowed a bit this week.

MLPs on a price basis are underperforming year to date, and even with distributions included, the gap is wide.

So, where do we go from here?  Seems like we’re headed back into high correlation, binary outcome stock market performance for a while with all eyes on Europe again… I may be wrong, but it doesn’t seem like the cash being withdrawn in Greece is going to find its way into U.S. stocks or into MLPs for the time being.  Its too bad that the global equity markets have become so dependent on central bank stimulus to feed the beast.

Maybe Zuckerberg will take his $1.15 billion in Facebook IPO proceeds and invest it in MLPs (or better yet, hire me to do so)…except that he has to pay $900+ million in taxes as a result of this liquidity event, so not much left over for MLP stimulus…wow.

I won’t be wrapping the news this week, too much work to do preparing for a cross country move the day after next week’s NAPTP conference.  Not much happened in terms of MLP news this week anyway, KMI/EP announced drop down to EPB (equity deal coming), MEMP did a small acquisition, RGP and EEP announced expansions, and KMI is replacing EP in the S&P 500 (and dropped out of the MLP conference).  Here is the usual chart I put in that post, and a few other ugly charts highlighting the worst of the worst MLP price action since the beginning of May.

CPNO Since May 1

RNO Since May 1

ATMs are great for issuers, the cost in terms of gross spread and price disruptions is much smaller for ATMs than for regular overnight follow on deals.  I think they will become very popular, even though the big investment banks might not like them because fees tend to be lower for ATMs.  In fact, I even know of a firm that does ATMs, in case you were curious…

Click here to read the rest

Update: You Are Here

While I’m here, might as well recount the brutal last few weeks for the market and MLPs.  As it stands right now, despite oil dropping to near $90 per barrel, MLPs are outperforming the broader S&P 500 since the selloff began.  The S&P 500 closed on May 1 at 1405.8.  It’s been free fallin since, losing value in 9 of the last 11 trading days and dropping a total of 5.8% (5.6% counting dividends) to 1324.8.  MLPs have done only slightly better, registering negative changes on 10 of the 11 trading days since May 1 and losing a total of 5.5% of value, but only -4.7% including distributions.

Year to date, stocks are still leading MLPs, with total return for the MLP Index roughly flat at -0.33% compared with +6.2% for the S&P 500, but the gap is narrowing.  A chart of year to date price change is below, as you can see, MLPs are moving in lockstep with the S&P 500 since around April 1^st.

We’re on track for another brutal day for all things risk today.  As was the case last year heading into the NAPTP MLP Conference, MLPs are in the midst of a correction with the conference next week.  The difference is that last year, MLPs were down more drastically and sooner than the broader market.  I am guessing I’ll hear lots of “buying opportunity” and “throwing the baby out with the bathwater” talk from MLP management teams and research analysts.  Historically, almost any time the MLP Index has dipped substantially has been a good buying opportunity, so that sort of attitude is probably appropriate.  The key is to recognize the risk of a correction before it happens and to have cash available or to have some short protection on to insulate your portfolio from dips.

Disclosure: The information in this article is not meant to be financial advice, I am not your financial advisor and I am posting my comments for informational purposes only.

As they used to say at the syndicate desk when an offering was trading poorly, lots of market headwinds.  Risk off week, with oil, gold and stocks all down.  Natural gas was up a bit, but is still 40% cheaper than a year ago.  Also, the MLP ETF AMLP had its ex-date Monday, which added to the sector pressure.

In addition to the headwinds, MLPs did themselves no favors by pricing $1.6 billion in MLP capital markets transactions this week.  Counting the $500 mm equity LNG plans to invest in CQP (see below).  Add in the $800 million of At-the-market equity distribution deals filed this week ($500 by KMR and $300 by PAA), and it turns out more than $2.8 billion in combined debt and equity was raised by MLPs this week.  That’s a huge number, and it seemed to clog the drain a little on the way down.

Let’s say the MLP capital market is this guy in the video below: the world record holder for most thrown grapes caught in his mouth in 3 minutes.  Normally, he chugs along catching 2 grapes a second, no problem.  This week was like what would happen if the grape throwers starting throwing more grapes faster, while backing up.  The backing up part (market headwinds) would have been hard enough, but adding in the additional grapes, and this guy might get overwhelmed and start missing some, or maybe his mouth would start to fill up with grapes… you get the idea.  I’m also reminded in this analogy of the concept of marginal utility, grape 1200 is not as tasty as grape 5 or 10.

Sidenote: its great having 3 kids too young to be coordinated enough to throw a grape up in the air and catch it in their mouth.  My ability to do so puts me on par with the greatest athletes in the world in their heads.

Pending MLP IPOs:

Oh, and there are more MLPs to come.  By my crude count, there are currently 10 MLPs in various stages of IPO registration, including 3 new names this month so far.   Josh Davidson at Baker Botts is very busy, with his name on the cover of 5 of the 10.  Here is the full list:

• Armstrong Resource Partners (Amendment 5 filed 5/4)
• Sprague Resources (Amendment 4 filed 3/23)
• USA Compression (Amendment 1 filed 5/10)
• Foresight Energy Partners (Amendment 1 filed 4/12)
• Quicksilver Production Partners (Amendment 1 filed 5/11)
• EQT Midstream Partners (Amendment 2 filed 5/10)
• Maxum Energy Partners (Initial S-1 filed 5/4)
• Northern Tier Energy LP (Amendment 2 changed this corporation into MLP on 5/7)
• Lehigh Gas Partners (Initial S-1 5/11)
• Southcross Energy Partners (Initial S-1 4/20)

It makes you wonder who will buy all these incremental MLP units?  The MLPs that are currently trading can’t catch a bid, like we saw with CLMT this week on a relatively small equity issue (see below).  Who is out there that doesn’t own MLPs or hasn’t heard about MLPs and is going to support this sector’s massive paper addiction?  I guess like any supply and demand equation, if there is truly no demand, then MLPs would stop issuing so much equity….right?

News of the (MLP) World

• Markwest buys Keystone Midstream, Expanding Marcellus and Utica Footprint, Then Issues $442 mm In Equity (press release)
• $512 mm consideration
• Keystone was owned by Rex Energy, Stonehenge Energy and Sumitomo Corp
• MWE will need to invest $500 mm in growth capex to support Rex’s drilling program and to achieve target $130 mm EBITDA by 2016
• Another high multiple purchase in the Marcellus with hockey stick growth expectations, betting on the come starting to become the norm in the Marcellus (like with WPZ’s high multiple purchase of Caiman)
• 8.0 mm unit equity offering at $55.28 per unit, raising $442 in gross proceeds (press release)
• MWE’s 10th equity offering since beginning of 2009, most in the MLP sector, and 4th offering in last 12 months
• Last equity offering was in March, at a per unit price 8% higher than this one
• All that growth has to be funded, MWE’s distribution per unit is up 18% year over year, but its 3 year distribution CAGR is only 7.3%
• Crosstex Energy ($XTEX) Announces Expansion, Issues Equity and Debt, total Proceeds $393 mm (equity and debt)
• $250 mm senior notes due 2022, priced at 7.125%
• $143 mm equity at 3.5% re-offer discount, trades well in after market, closing above issue in negative week
• Use of proceeds Cajun-Sibon NGL pipeline and Riverside expansion
• XTEX will expand Riverside fractionation facility in Louisiana (press release)
• Capacity increases 10,000 bbls/d, from 4,500 to 14,500
• Underwritten by long-term supply contract
• Cost of $16mm, to be in service 1Q13
• BreitBurn Announces Acquisition (press release)
• $220 mm purchase price, 56% oil, 13 year reserve life, 9.5 mmboe proved reserves, 160 drilling locations, 49 existing wells
• First acquisition for BBEP in Permian Basin
• Oiltanking to Acquire United Bulk Terminal (press release)
• This is OILT’s parent company making the acquisition, terms of the deal undisclosed
• OILT traded well on the news, I guess on outlook for future potential dropdown, OILT was up 3.7% on the week
• PVR Prices Upsized Bonds (press release)
• 8.375% yield, 2020 maturity
• Deal was upsized from $450 mm to $600 mm
• Use of proceeds to fund portion of Chief acquisition, rest to term out some of credit facility
• Copano Announces Fresh Expansion at Houston Central (press release)
• 400 mmcf/d additional processing capacity
• $190 mm cost to be in-service by 2014
• 5x cash flow multiple, very solid
• Announcement does nothing to stop alleviate the beat down CPNO unit price took this week after earnings and indications that the richness of the gas from the Eagle Ford was causing operational issues
• Distribution growth won’t happen in 2012, its as if CPNO and ETP have a bet as to who can go the most consecutive quarters without a distribution increase (FGP at 66 quarters is the Dimaggio of this particular stat)
• Calumet Specialty Products (CLMT) Equity Offering (press release)
• 6.0 million units, priced at $25.50 per unit, $153mm in gross proceeds
• CLMT priced at a 4.6% discount, second highest this year
• Traded down another 5.7% the next day, for total of 10% decline in one day, finished the week down 9.6%
• LNG gets $468mm equity infusion from Asian Partners (press release)
• Temasek and RRJ Capital to invest in Cheniere Energy ($LNG)
• Temasek and RRJ are asia-based and focused investment firms, which are now in discussions with LNG on a strategic relationship to help Cheniere tap the Asia market
• LNG will use the proceeds plus cash on hand to purchase $500mm of equity in Cheniere Energy Partners ($CQP)
• Parties are working on strategic partnership for LNG sales, marketing and trading

Disclosure: The information in this article is not meant to be financial advice, I am not your financial advisor and I am posting my comments for informational purposes only.

RNO got a little bounce this week after dropping the most in the sector last week.  In terms of secular growth MLPs (i.e. ones that go up more consistently than NRP and RNO’s bounce), OILT and CQP were both up big.  CPNO’s earnings announcement and dissapointing guidance / distribution announcement saw its stock get slammed.  Maybe CPNO gets frustrated enough to take a buyout offer from some other MLP that might be better able to monetize its assets.  Chesapeake was down in tandem with its parent, CHK, particularly late Friday afternoon.

Not much to get excited about out in the economic and financial media, but maybe that’s a good contrary indicator of some potential positive shift going forward, or maybe not.  We shall see.

Year to Date

Buckeye creeps into the YTD bottom 5 this week, after dropping another 7.1% this week, wow.  It is very unusual to see ARLP and BPL in the bottom five this late in the year, but it speaks to the challenging fundamentals in their respective businesses, although BPL’s GP buyout and growth projects were self-made challenges.  After another strong week (+4.2%), CQP is now up 41.7% for the year, not including distributions.

On a price basis (no distributions or dividends included), the MLP Index turned negative this week.  Oil is now down 4% for the year, adding to the unpleasant environment caused by dropping natural gas and NGL prices.  MLP pure-play general partners and variable distribution MLPs are still outperforming, but the variable distributions MLPs have come down to earth of late.

That’s all I got this week, moving to Texas in 12 days, posting might be sporadic as I coordinate that and the NAPTP Conference next week.  Thanks for reading.

Poker was an excuse to drink beers and smoke cigars without the usual high school driving around risks.  Rounders was quoted incessantly at the table.  One of the quotes from Matt Damon’s character that sticks in my head regarding poker:

There’s no other game in which fortunes can change so much from hand to hand. A brilliant player can get a strong hand cracked, go on tilt and lose his mind along with every single chip in front of him.  This is why the World Series of Poker is decided over a No-Limit Hold ‘Em table. Some people, pros even, won’t play No-Limit.  They can’t handle the swings.

Anyway, that quote pops into my head on weeks like this when stocks of all kind are falling (and people run around like the sky is falling).  But, the sky is not falling, and MLPs held their own this week, with the MLP Index down 0.6% this week, with the big drop coming Thursday (-1.2%).  The S&P 500 dropped Friday by 1.6% and 2.4% for the week, the worst week for the benchmark index so far this year.

Oil futures had their worst week so far this year as well, down 6.0%.  Weak jobs, concern over weakness in European demand, continued growth in oil inventories were the culprits.  Natural gas had another strong week, and is now up more than 20% from its bottom a few weeks ago.  If natural gas and oil start moving towards each other and the oil to gas ratio starts to normalize, the NGL business will start to look much less attractive than it has the last few years when NGL growth has made up for weakness in other areas of the midstream space.

MLP news and earnings releases were overwhelming this week. Very quick recap:

• 35+ MLPs reported earnings this week, some good, some bad, some really bad (like $RNO, unfortunately)
• Largest ever MLP IPO Petrologistics ($PDH) priced and started trading
• ETP announced agreement to acquire SUN, the GP of SXL for $5.3 billion
  • 23% premium, no sign of competing bids yet
  • Announcement comes a month after its GP completed its merger with SUG
  • Org chart will be BANANASafter this deal closes
    • ETE owns GPs of ETP and RGP
    • ETP will own GP of SXL
    • 2 layers of IDRs (SXL to ETP to ETE)
  • Long ETE on all of the equity that will get issued at ETP and RGP in the next few years as the family of companies attempts to digest this never-ending acquisition spree.
• NMM equity offering raises $62.7 million
• MWE announces agreements with CHK and Antero
• LGCY acquires around $90 million in oil properties
• Buckeye hit a 52 week low
• Dropped 5.2% on Friday after earnings were released in the morning.
• Since it went public in 1986, and not including September 2008 through March 2009 (which we’d all like to forget), BPL has only had 9 trading days when BPL was down more than 5.2%, including 2 days in October 1987 and 1 in September 2001.

The bigger moves were clearly on the downside, as most MLPs not in the Alerian MLP Index were down sharply last week, including all  the bottom 5 performing MLPs this week.  RNO was the big loser, finally breaking down like the rest of the coal industry. Higher natural gas price is bad news for CQP, which was down 4.2% after Friday’s earnings release and 9.6% for the week.   The top 5 were led by NGLS with strong earnings.  OKS also reported strong earnings on NGL strength.

MLPs are still up this year, S&P 500 still up, but from the looks of the futures tonight, we are in for another weak May Monday.

Coal, NRGY and natural gas leveraged gathering dominate the bottom 5 for the year.  A grab bag of small caps dominate the top 5 for the year.

Have a good week, stay focused and don’t go on tilt…

Disclosure: The information in this article is not meant to be financial advice, I am not your financial advisor and I am posting my comments for informational purposes only.

Click here to check out the full article and detailed lists.

The CEO with the lowest compensation package on the list is Richard Kinder (and has been since 2000).  He is sort of an anti- or bizarro- Aubrey McClendon.  He gets paid $1 in salary and $26mm in dividends from stock he owns.  Counting those dividends makes him the most highly compensated MLP CEO, but at almost no cost to the company (outside of the large IDR payments, but I believe those are unrelated in this context).  No matter what you think of his company, he has left personal millions on the table for the benefit of unitholders, and unfortunately that is unusual these days.  I think it would be more common if there were more “founder” CEOs out there like Kinder, Joe Craft and ones that have recently passed away like Dan Duncan and John Eckel, but for whatever reason as we see the MLP space mature, we’ll see more corporate and private equity backed CEOs than founder-types.

MLP Titans Rich Kinder and the late Dan Duncan (with stuffed lions).

An article will come out soon in Midstream Business Magazine on the subject of IDRs that will feature several quotes from me and some data I pulled together for the article.  The original assignment from the editor was something like, I hear a lot about how IDRs are going away, go write an article on the Death of the IDR.  But I think I was able to convince the author that IDRs are not dead, in fact of the last 10 MLP IPOs, 9 of them had IDRs, including 100% of the last 10 midstream IPOs.  The chart below lists the last 10 MLP IPOs.  Note I am not counting MLPs without a stated minimum quarterly distribution (variable distribution MLPs like RNF and UAN).

There are two reasons I can see why IDRs are still prominent for midstream MLPs:

• Doesn’t matter at the IPO – bankers will tell MLP management team (correctly) that the market will not give any extra IPO valuation credit for going public with no IDRs.  A few years down the road, when the MLP reaches the top tier, then management can start to hint that the IDRs are affecting their cost of capital.
• At that point, management can extract all of the extra credit that was not going to be given at IPO for those IDRs (and more) when it buys the IDRs back with L.P. equity.  Short sighted investors have yet to demand that IDRs go away, so why take them away at IPO.
• Reminds me of the saying, attributed to Thomas Jefferson: the exact amount of tyranny you will live under is the amount you put up with
• Competitive Bids Mostly Against other MLPs – a greater percentage of E&P MLPs have chosen to IPO with no IDRs or with an LLC structure.   The thesis behind E&P MLPs is that they will be the entities that roll up the mature properties of the country.  When they are bidding on these assets, E&P MLPs are going up against corporations, and cost of capital is paramount to E&P MLPs being able to outbid E&P corporate bidders.
• Midstream MLPs are mostly competing with each other, because there are so many more MLPs.  There are not many public corporations whose primary business is gathering and processing.

Click below for an excel file with a list of every MLP and its corresponding top IDR tier, current GP % take (not counting any temporary givebacks like $ETE announced yesterday), and some notes on the MLPs that don’t have IDRs.  You will note that the MLPs with paying out the most total cash flow to their GP, are in order: KMP (45%), ARLP (40%), ETP (37%), PAA (32%), WPZ (28%).

IDR Data

IDR Data (older Excel versions)

Related Posts:

General Thoughts on General Partners

Distribution Basics

May has historically and consistently been one the weakest months for MLPs, 8 of the last 16 Mays (50%) have been negative, compared with just 38% for the Index overall since 1995.  May 2010 (-6.2%) and May 2011 (-5.7%) were particularly bad. Natural gas has found some support and MLP equity issuance has slowed, so MLP Index is closing in on 400 again.   Expect distribution ex-dates and more equity offerings to hold MLPs down further, until a catalyst like commodity prices or positive economic data changes the current environment.

So, where do we go from here?  One way to look at it is a matrix of that highlights what distribution growth rates and exit yields will do for Index return in the next 12 and 24 months.  With this matrix, you can see what your view of MLP yield and growth will produce in returns.  It’s just math.  If you think MLPs will exit next year at 6.5% and grow distributions 4%, MLP Index will produce just a 3.8% total return from here.  If you think MLPs will exit at its current yield plus 6% distribution growth in the next 12 months, that will result in 12.3% total return in next 12 months.  You can see that the impact of exit yield changes has a more pronounced effect on total returns than distribution growth.  In other words, its not enough to just buy a high growth MLP, your return is largely dependent on buying that growth MLP at a reasonable price.

Back to this week’s more recent history.   MLPs finished up 0.4% in a week that saw virtually every asset class rise.  The S&P 500 finished above 1400 again after a 1.8% rise week over week.  U.S. treasuries rose, sending the benchmark interest rate down to 1.93%.  Gold and oil were up a bit, and natural gas futures jumped 13.5% all the way to $2.19, so still a long way to go back to most research analyst’s long term natural gas price decks (~$4.00 per mcf).  MLPs continued their restrained volatility (see my earlier commentary on how few days in 1Q MLPs changed in price by more than 1% in a day, a near record); the 0.4% move trailed most stocks, including energy stocks (XLE, +2.7%) and utilities (+1.4%).

MLP earnings results were inline or positive, and NRGY took a major step towards fixing its problems (more on that below), so why the under-performance?  My guess is that in these weeks when risk assets are rising, investors get more excited about other sectors and less interested in dividend stocks and MLPs.  But even the Dow Jones U.S. Dividend 100 Index was up 1.0% last week.  Maybe there is some investor saturation after the massive equity issuance levels for MLPs over the last 2 quarters.  By investor saturation, I mean perhaps we are nearing the point where most everyone that knows about MLPs and likes them is already invested in them, and without a step change in institutional interest, MLPs may be range bound as a sector.  Of course, there are always individual MLPs popping and dropping by large amounts, but this year those pops have been offset by drops of other MLPs, and larger cap MLPs that dominate the MLP indexes have mostly stagnated or sold off this year.

Maybe MLPs have just gone stale compared with other securities.  According to Merriam Webster, the definition of stale is (1) tasteless or unpalatable from age, (2) tedious from familiarity, or (3) impaired in vigor or effectiveness.  Sounds about right, but its usually times like this when everything is calm that the bottom drops out.

Earnings Recap

• LINE – beat analysts’ expectations
• Lower interest expense and capex than expected, higher production from acquisitions, good coverage
• 100% of current natural gas production hedged through 2017, that’s almost 6 years!!
• 100% of current oil production hedged through 2015
• Solid results out of Hogshooter wells, which are really expensive ($8-$10mm) by MLP standards, but apparently carry really high returns 100%+ IRRs
• GEL – inline or slightly better than analyst’s expectations
• Less than expected volumes from Gulf of Mexico pipeline
• APU – beat analysts’ expectations
• Benefited from lower wholesale propane costs with higher retail propane margins
• WPZ – beat analysts’ expectations
• Solid volumes for pipeline and gathering businesses
• NGL production was up 18% yoy, but margins were down 13% quarter over quarter
• TCP – below analysts’ expectations
• Weak volumes on Great Lakes system due to warm weather, high storage inventory
• NS – below analysts’ expectations
• Weak asphalt results

Upcoming Earnings

• Next Week: BWP, ARLP, PVR, HEP, EEP, EPD, OKS, CLMT, MMP, SXL, SPH, UAN, LGCY, NGLS, WES, BPL, SEP
• Week After: LRE, TLLP, CMLP, PAA, PNG, XTEX, CHKM, OILT, QRE, MEMP, RNF

News of the (MLP) World

No capital markets transactions this week, but aside from earnings releases above, there were a few news items of note.

• NRGY Announces Effective Distribution Cut Smokescreen with Sale of Propane Business Accompanying 46.8% Distribution Cut (press release)
• NRGY sells propane business for $1.8 billion, moving one more big step closer to transforming completely into a GP holding company with very lucrative IDRs
• After drop down of remaining midstream assets, transformation will be complete
• No word yet on when NRGM buys out the IDRs of NRGY in a merger akin to what NRGY did when it bought NRGP, but at some point those 50% flat IDRs are going to cut into NRGM’s cost of capital…and the financial engineering dance will continue
• NRGY unit price popped 20.4% on the week, still 52.5% lower year over year
• NRGY also announced 46.8% decrease in quarterly distribution.  Distribution cut was expected, and the announced $0.375 distribution was above most analyst expectations, which mostly called for a 50% cut in distribution to $0.3525
• Analysts universally praised the sale and distribution strategy going forward, and there were several analyst upgrades
• The deal was sort of similar to the deal back in 2004 when NRGY purchased the propane assets of troubled MLP Star Gas.  This time, SPH gets to play the savior role, and the number of MLPs operating retail propane assets has dwindled down to 3 majors (APU, SPH and FGP).  This is quite a change from 1994-1996 when 8 propane MLPs went public in 2 years.

• Petrologistics (PDH) files Updated S-1 with Pricing (filing) 
• This is going to be a very large IPO.  Base deal calls for $700 million IPO (35.0 million units at $20.00 per unit midpoint).  This would make it the largest MLP IPO ever (not counting KMI, which is a corporation), surpassing EPB’s $500 million IPO in 2007.
• PDH will not have a minimum quarterly distribution, instead PDH will vary its cash distributions with variances in its quarterly cash flow.  The S-1  estimates that PDH will distribute $2.20 per unit, which would equate to an 11% yield at the midpoint IPO range.
• PDH will have $343.0 million in debt pro forma the IPO, and $47.3 million in cash, for enterprise value of $3.1 billion
• 8.3x EV / projected 2013 EBITDA at IPO
• 33.5 million units ($670 million) are being sold by its PE sponsors Lindsay Goldberg and York Capital (through a subsidiary Propylene Holdings)

• BBEP Announces $98 million Acquisition (press release)
• BBEP arrives fashionably late to the 2012 E&P MLP acquisition party
• 5.9 mmboe proved reserves in Wyoming
• 100% oil production of approximately 600 boe/d, 20+ year reserve life

MLP CEO Compensation Review

The final annual proxy statements were filed this week, so we now have compensation data for all MLPs.   Stay tuned later this week for my annual review of MLP CEO compensation.  A quick preview: the top 3 base salaries in the MLP space went to GLP’s Eric Slifka ($800,000), ATLS’s Edward Cohen ($750,000), and LINE’s Mark Ellis ($746,154).  The top 3 highest in total compensation: ATLS’s Edward Cohen ($20.9 million), APL’s Eugene Dubay ($9.4 million), and LINE’s Mark Ellis ($9.0 million).  As you can see, there is no correlation between market capitalization of a given MLP and its CEO’s compensation.  GLP and APL/ATLS are not even in the Alerian MLP Index that includes the 50 largest MLPs (roughly 50, there are some companies with multiple Index constituents, like KMP/KMR and ETP/ETE).   LINE compensation numbers make more sense.  LINE is the 9th largest MLP and far and away the largest E&P MLP.  Also, Mark Ellis is not a founder of LINE.  MLP founder CEOs tend to have lower salaries and instead reap massive profits from GP and LP ownership (e.g. Rich Kinder’s famed $1 salary).

Propane doesn’t look so bad this week, but its all about timing.  NRGY’s announcement of better than expected distribution cut (sort of like a weaker than expected punch in the face) and the announcement NRGY will exit the retail propane business sent it up 20.4% for the week to $19.08.  Widen the lens a bit, and the picture is not so bright, last April 27th NRGY closed at $40.24 per unit, so that’s more than 50% decline in value last 12 months.  But hey, could have been worse, and it appears NRGY plan to spin off NRGM with excessive IDRs, then morph NRGY into a pure play GP holdco may work.

In other names, CQP had a huge week even with higher natural gas prices, NKA continued its strong trading, and FGP caught the “propane may not be absolutely terrible” wave to a strong week as well.  NS had ok earnings, but flat distributions and not many very high growth expectations sent it lower.

Remember that wider lens we were talking about for NRGY and OXF?  Even with the sharp uptick this week, OXF and NRGY remain in the cellar on a year to date basis.  CQP is far and away the big winner this year to date.

 The wide look at year to date performance highlights that even with the great week natural gas had, natural gas remains the biggest loser.  With the S&P 500′s outperformance this week, MLPs are back to more than 10% underperformance year to date.  Note that doesn’t include distributions.  GPs are way out in front.

Distribution Announcements

30 MLPs and 3 GP holding companies announced distributions this week. So far this quarter, 60 MLPs have announced distributions, averaging 0.9% distribution growth quarter over quarter.  37 of those 60 MLPs have raised distributions.  6 out of 7 GP holding companies have announced distributions, 4 announced raises, average dividend / distribution growth of 4.2%.

• LINE raised 5.1%
• APU raised 4.9%
• EROC raised 4.8%
• ATLS raised 4.2%
• MWE raised 3.9%
• CHKM raised 3.8%
• MMP raised 3.1%
• OILT raised 2.9%
• RRMS raised 2.8%
• PVR raised 2.0%
• PSE raised 2.0%
• WPZ raised 2.0%
• SXL raised 1.8%
• APL raised 1.8%
• DPM raised 1.5%
• HEP raised 1.1%
• EXLP raised 1.0%
• VNR raised 0.9%
• LGCY raised 0.9%
• EVEP raised 0.1%
• NRGY cuts distribution 46.8%
• OXF held flat, but cuts subordinated distribution to $0.10 (77.1% less than common unit distribution of $0.4375, saves $3.5 million per quarter)
• RGP, MMLP, CPLP, NKA, NS, NSH, STON, NMM, ETP, ETE, MCEP announced flat distributions

More to come in Week Thoughts tomorrow or Sunday on earnings this week and next.