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November 3, 2013

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MLP Week Thoughts: Fall Back

Like clockwork, MLP prices fell on the week when more than 50 MLPs passed through their ex-distribution dates.  The price index was down 1.5%, and while I don’t know what the total return index did last week (because I don’t have a Bloomberg terminal or Factset access at the moment), it was probably flattish.  Oil and natural gas prices were down significantly this week, while interest rates were up 12 basis points, but all still within the ranges we’ve seen throughout the year.
Weekly AMZ_11-1
In the coming week, we’ll have two more MLP IPOs price, more earnings releases, more ex-dates and likely additional equity and M&A news.  We may even get another catalyst for LINE, which has been a roller coaster ride the last few weeks.
Apologies for the late and brief post, busy weekend filled with logistics issues for my pending cross-country move, a goodbye trip to see my sister and 3 nephews out at Camp Mystic in Hunt, TX, some youth soccer games, oh and that gained hour in the middle of the night Saturday that my kids failed to account for (waking up at 4:49am this morning).  These are not excuses, just things I chose to focus on that were not the blog this weekend.  Back to normal(-ish) next week…probably.
Winners & Losers
LINE popped biggest this week, while EROC sunk lowest.  Weak commodity prices and weak earnings sent the rest of the bottom five lower.  A surprising 10% quarter over quarter distribution bump led to a big price bump for ACMP, which has become an analyst favorite in recent quarters.


LINE made a big jump from 2nd to last to 5th from last.  EROC went the other way, from 4th worst to 2nd worst.  Outside of those rearrangements, there were no changes to the bottom or top 5 constituents this week vs. last week.


GP holding companies had a bad week as well down 1.2% (not including distributions), led by NSH at -5.7%.

GPs_Week over Week

News of the (MLP) World



  • ARC Logistics Partners launches IPO of 6.0mm common units with midpoint price of $20.00 (7.75% IPO yield)
    • Expected to price 11/5
  • Midcoast Energy Partners (MEP) launches IPO of 18.5mm common units with midpoint price of $20.00 (6.25% IPO yield)
    • Expected to price 11/7

M&A / Growth

  • Natural Resource Partners (NRP) announces acquisition of non-operated working interests in oil and gas properties located in the Williston Basin of North Dakota for $35.5mm (press release)
    • Second acquisition of producing, non-operated working interests in the Bakken / Three Forks play, as NRP makes a push towards diversification away from coal royalty
    • Several analysts believe NRP will be one of the next distribution cut candidates, or at least mentioned NRP in reports regarding EROC’s distribution cut


  • USA Compression (USAC) adds John Chandler to board.  Chandler is the current CFO of MMP.  USAC’s board and management team is stacked with MLP experience and this is another solid addition
  • LINE announced solid earnings and announced the SEC has no futher comments on the latest amended S-4 regarding the LNCO/BRY merger, which is a positive step towards completing the merger
    • LINE / LNCO will likely have to raise its original exchange ratio, but even with a big increase in the ratio, the deal will be significantly accretive and will be a big positive for the stock
  • BWP announced weaker earnings, persistent headwinds from natural gas price weakness and lower differentials impacting annual re-contracting
    • Revenue to be $40mm negatively impacted, according to management, due to contract renewals at lower rates for transportation and storage
    • Distribution growth not likely to resume until after 2015

Distribution Increases:

  • ACMP: $0.535, +10.3%
  • AHGP: $0.8075, 2.9%
  • ARLP: $1.175, +2.0%
  • BBEP: $0.4875, +1.6%
  • BPL: $1.075, +1.2%
  • EXLP: $0.5275, +1.0
  • EVEP: $0.77, +0.1%

Flat Distributions:

  • BWP ($0.5325), NS ($1.095), NSH ($0.545), NKA ($0.35), EEP ($0.5435)

Cut Distributions:

  • EROC: $0.15, -32.8%, second distribution cut in 5 years
    • No MLP that is trading today has cut its distribution twice (not counting those whose one distribution cut played out over a few quarters), very hard to get investors to buy a second comeback in 5 years

Variable Distributions:

  • CVRR: $0.30, 77.8% less than last quarter
  • UAN: $0.36, 38.3% less than last quarter
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