Month: May 2018

Midstream traded down and underperformed utilities (+3.2%) and the S&P 500 (+0.3%), with oil price declines offering a reason for midstream to pause following a very strong couple of weeks for oil, energy and midstream. Considering XLE was down 5.5% and oil dropped 5%, midstream held up pretty well, benefiting from its considerable income component in a good week for treasuries and utilities.

Midstream overall outperformed and MLPs again led the way, up another 3.1%.  The MLP Index is now up 14.4% the last 8 weeks, rallying in 6 of those 8 weeks.  Energy and oil prices continue to trade well, with MLPs tryng to keep pace with broad energy stocks.  News flow was light until Thursday’s simplification party.  Weaker Canadian and utility performance dragged down the broader AMEI midstream index performance.

Back in November, I published a report on distribution growth (or lack thereof) across the MLP landscape.  The basic takeaway was that certain industry participants were citing numbers that seemed to exaggerate distribution growth and sweep under the rug the actual change in income felt by those who owned a diversified basket of MLPs over the last few years.  In addition, I argued that distribution yield as a valuation metric should not be considered in an environment of uncertain distributions, and instead cash flow per share and EBITDA multiples were better metrics to use.

Midstream resumed gains this week, with similar gains across MLPs, U.S. and Canadian corps.  Oil and the broad stock market rallied as well.  No surprise, but $70/bbl seems to be a positive for energy stocks broadly.  Midstream-specific sentiment has also benefitted from solid earnings season that included baby steps towards resolution of pending simplifications, de-leveraging, etc.  The MLP Index is just one more good week away from being flat for the year (including distributions).

It was a pretty great week for Midstream (AMEI +1.9%), but not so much for MLPs (-0.2%).  The busiest week for 1Q earnings started exciting with a big merger of MLP sponsors and very strong 1Q results from big MLPs EPD and MPLX.  As the week continued, however, MLP investor sentiment was dealt another blow with a surprise distribution cut from TCP and weak results from BPL.