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June 21, 2015
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MLPs showed signs of life early in the week gave way to further selling in the back half of the week for MLPs. The MLP Index bounced Monday (+1.3%), and faded throughout the week, before eventually capitulating Friday (-1.6%) to finish the week down 0.5%, a fifth straight week of declines.
On a price only basis, the MLP Index established a new 52-week low Friday. Energy sentiment across the market remains negative. The S&P 500 Energy sector was the worst performing in the S&P 500 at 0.5%. Declining interest rates helped utilities and the broader stock market, while oil and NGL prices seemed to pull MLPs lower, again.
The index is 19.8% off its high from last August (including distributions), and is down 6.6% since the last day of the NAPTP conference in May. On its way to setting a new trough post-conference, MLPs have declined in 13 of 19 trading days.
In perhaps my most obscure pop culture reference ever, the title above comes from a 10 second Comedy Central promo featuring Mike Myers from 1999 that somehow stuck in my head ever since, and that I somehow found on the Internet. It captures the mood of the MLP market from my perspective.
Hopefully everyone is (or was depending on when you read this) able to separate themselves from the market this weekend and enjoy Father’s Day. Also, hopefully watching another chapter in the slow demise of the once-great Tiger Woods at the U.S. Open doesn’t remind you of MLPs in any way…
Poll Question Recap
Last week’s poll question asked what valuation read-throughs could be gleaned from the high EBITDA multiples paid for the Hess Midstream assets by GIP and the Hiland assets by KMI. The winning answer was that the high multiple was more reflective of the GP value embedded in the Hess Midstream acquisition that reflective of MLPs being undervalued. Second highest result (33%) was the answer that the multiple indicates MLPs are undervalued. Interestingly, 18% of you said it meant MLPs were overvalued, and 15% of you didn’t think it meant anything about MLP valuation.
Poll Question
This week, I want your opinion on the drivers of recent MLP weakness, but I did not include an “all of the above” option, because chances are all of these are playing a role.
Sorry, there are no polls available at the moment.
Winners & Losers
PBFX led all MLPs this week (not counting the penny stock takeout of NKA), because PBFX’s sponsor (PBF Energy) acquired a Louisiana refinery, and estimated an additional $30mm worth of MLP-qualifying EBITDA came along with it. No other top 5 performing MLPs had any news. NGL traded up sharply on heavy volume in the final minutes of trading Friday on no news, vaulting into the top 5 for the week.
Not shown on the chart below, EPD was down almost 3% Friday, closing at its lowest point since December 2013. EPD is now 25.5% off of its 52-week high, widely underperforming the index of which it represents more than 17%. So much for safety in large-cap MLPs…
On the downside, AZUR’s equity offering derailed its stock price in a big way. NSLP made it two straight weeks in the bottom 5 as well. SXCP was slammed on news that Haverhill Chemicals (a customer of SXCP) would be permanently shutting down a facility.On a year-to-date basis, the top 5 shifted around a bit this week, with DKL rising to 2nd place, leapfrogging TLP and a few others. CLMT and NGL jumped in to the top 5, replacing USAC (-8.8% this week) and MMLP (-6.6%). There is still a small cap bias among the top 5, while the bottom 5 is dominated by coal and E&P MLPs.
GP Holding Companies
There was limited follow-through week over week for individual GP holding companies. TEGP and ATLS led the way last week, and underperformed this week. WMB seemed to catch a bid, perhaps helped by ramping volumes at Geismer. PAGP and ENLC clawed back some of their losses from last week, while AHGP continued lower.
News of the (MLP) World
It was quite an active week for MLP press, and for the MLP equity printing press. Two MLP IPOs launched and two small cap MLPs executed very challenging equity offerings. Also, we got a series of drop down acquisitions in the U.S. (and a big one in Canada). Also, an MLP that had basically been slowly dying since it went public, was acquired for a mega premium to its recent trading price.
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