MLPs and midstream companies arrested their recent decline this week with a flattish week. The broad equity market had a strong week, helped by gains from some big tech firms on earnings results. The risk-on action appeared to help the large midstream corporations that tend to get more passive flows, and Canadian midstream was also mostly positive.
Natural gas prices also arrested their declines, but oil prices drifted lower. Neither commodity is in a comfortable spot for the energy sector generally, which is making it hard for midstream to garner investor interest.
Notable earnings this week included PAA/PAGP and NS, both of which were better than expectations with achievable full year outlooks. We still have a few more weeks of earnings. TRP, ENB, DCP, and NBLX are notable earnings reporters in the upcoming week.
The Process Takes a Breather
Even though we are more than 50 games into the 82-game season, the NBA halfway point is celebrated with nearly a week off around the All-Star Game next weekend. Here in Philadelphia, the 76ers need a break, as they stumble into All-Star weekend in 5th place in the East despite very high expectations to stat the season. Joel Embid is getting called out by both Shaq and Barkley. Things just aren’t working, and there are questions about the coaching staff, the future of Simmons and Embid, everything.
It’s unclear what the solution is for the 76ers, but the All-Star break can’t hurt at this point, and it offers some hope of a reset.
Like the 76ers, midstream started the year with hope and promise. But for the last 4 weeks, stock prices have drifted lower with oil and natural gas prices, and the MLP Index is down 10% (including distributions) since mid-January. Like the 76ers, it’s unclear in midstream what changes the relentless negative sentiment and selling pressure. But this week, with midstream basically flat, was a welcome break.
Any non-negative performance in recent years has felt like a break rather that a sustained positive inflection. It’s been like the pause in between rounds in the game “Punch Out!” when you don’t know the secret to beating Tyson.
But it is not inevitable that the selling resumes. There is another scenario where midstream starts to trade better from here, however unlikely it feels right now.
