What a week! The Alerian MLP Index dropped like a rock to start the week, closing Tuesday at a fresh 52-week low that was 6.0% lower than last Friday. On the back of stabilizing oil prices, MLPs traded better the rest of the week, including a 3.3% pop on Friday, to finish the week down just 1.4%. The Alerian MLP Equal Weight Index (AMZE) declined 3.0%, which highlights how midstream MLPs outperformed, a sign that some risk differentiation might be developing.
It’s been a risk-off year so far, with the broad market down 2%, interest rate on the 10-year are down to 1.82%, and utilities have picked up where they left off up and are up 3.3%. Oil was volatile all week, but rallied after hitting a new low Tuesday to finish the week slightly positive (U.S. oil spot price +0.7% week over week), breaking a streak of 6 straight declining weeks. Oil rallied 6.1% from Tuesday’s close to the end of the week. Natural gas was volatile as well, but finished up 5.1% for the week.
Winners & Losers
Oil stabilizing didn’t help upstream MLPs much this week. 4 of the bottom 5 were upstream MLPs. Only one of the top 5 this week was in the Alerian MLP Index (GEL). FISH popped 14% on the news that its GP was acquired and its growth rate would be accelerated.
Last week, midstream MLPs dominated the bottom five. Not so this week.
It’s still very early on, but a theme is emerging on the downside so far this year (upstream MLPs still weak). On the upside, the names are spread across subsectors, but they are all smaller, more thinly-traded MLPs.
News of the (MLP) World
There were encouraging signs for MLPs from the capital markets this week, as two non-investment grade MLPs successfully raised debt capital. Also, there were positive signs that strategic transaction opportunities for MLPs are beginning to emerge from the volatility. The Azure Midstream acquisition of Marlin Midstream’s GP is a sign of things to come. Azure was going to go public, but saw the opportunity to avoid the capital markets and get public quicker. There will be more transactions that would have otherwise been IPOs. Whether that’s producers shedding assets to MLPs when last year they would have gone IPO, or MLPs buying MLPs.
M&A / Growth Projects