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June 8, 2013

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MLP Week Thoughts: Its Not a Too-mah

This week’s employment release was better than expected, sending stocks higher, and saving MLPs them from a second straight weekly decline.  The MLP Index got back some of what it lost last week with a 1.4% gain, but is still 4.0% from its May 22 peak.  Just about all of its week over week gains happened Friday, when the index was up 1.4%.   Yield on 10-year treasuries, which closed last week at its 52-week high, dropped down to 2.075% Thursday before spiking again to just below last week’s close.   Crude was up 4.4% for the week, which helped propane end the week slightly higher than last week.  Natural gas was down 3.9% week over week, which probably contributed to ethane finishing the week below $0.26/gallon for the first time since late February.
Weekly Review_6-7-13
With MLPs back to their winning ways, expect to see more capital markets activity (i.e. equity deals) in the coming week.  I think MLPs will again take their cues from the broader stock market this week, which hopefully will uncover buying opportunities like we saw Wednesday and Thursday of this week.   As mentioned last week, MLPs tend to bounce following a 4%+ down week, then drop big in the subsequent week.
I don’t have much else to say, being a bit distracted this weekend following my mother-in-law’s successful tumor removal surgery Friday in Houston.  She had a tumor the size of two fists in her thigh, but its out now and she is recovering well.  I need her to make a full recovery as soon as possible so she can resume baby sitting duties, especially now that school’s out for the summer.  The clip below sort of combines the tumor and childcare talk above…

I am working on improving the site and getting my old posts organized better.  We’ve indexed all the posts and will have in place an easier way to navigate to your favorite classic posts on MLPs.
Winners & Losers
We had a broad range of winners and losers this week.  Most of the MLPs below didn’t release any news this week, but the leader, LRE, provided an operational update on its second quarter production that helped it take the top spot after its 9.8% drop last week.  XTEX and GLP were both in the bottom five last week, and rode the market strength back up this week.  OXF, volatile as usual, was down 13.7% after being in the top 5 last week.  Also notable gainer this week (+12%) was Constellation Energy (CEP), which I don’t include in my Winners and Losers list because it trades below $3 and pays no distribution.  CEP is now up more than 76% YTD.  Pretty soon, I’ll stop keeping such close track of OXF, because it trades just above $3/unit and pays no distribution…

Top5Bottom5MLPs_6-7_13

OXF reclaimed its bottom spot in terms of YTD returns.  LINE escaped the bottom five, replaced by OKS.  There are only 6 MLPs that have produced negative returns YTD.  SMLP and AMID remained the top two MLP performers.

Top5Bottom5MLPs_6-7_13_YTD

MLPs are still out front of stocks for the year so far, behind just MLP GPs, which are up nearly 24%.  Variable distribution MLPs outperformed the MLP Index this week, helped by an 11.4% gain from EMES, which benefited from initiation research reports from various banks following their IPO quiet period.

MLPs_World_6-7_13_YTD

News of the (MLP) World
There was little news this week outside of the SMLP offices.  SMLP announced two acquisitions simultaneously, its first drop down and first third party acquisitions.  These acquisitions came on the heels of upwardly revised guidance in mid-May, so its been quite a coming out party here in 2Q 2013.
There were no equity deals this week, just SEP’s announcement that they would be filing an ATM agreement.  There was some IPO news with Devon announcing plans to launch a midstream MLP IPO process with plans to file the initial registration statement in 3Q 2012 (Bloomberg).

News-of-the-World

Equity

  • Spectra Energy Partners (SEP) announces plans to file an equity distribution agreement to sell up to $200mm at the market

Debt

  • Buckeye Partners (BPL) prices $500mm of 4.15% senior notes due 2023 at 99.81% of par

M&A / Growth Projects

  • JV partners Kinder Morgan Energy Partners (KMP) and TransMontaigne (TLP) announce a $54mm, 900,000-barrel expansion at the 185-acre Battleground Oil Specialty Terminal Company, LLC (BOSTCO) (press release)
    • Expansion includes six, 150,000-barrel, ultra sulphur diesel tanks, additional pipeline and deepwater vessel dock access, and high-speed loading at a rate of 30,000 barrels/hour
    • Expected to be in-service by 4Q 2014 following the start of commercial operations at the previously announced $485mm BOSTCO oil terminal in 3Q 2013
  • Summit Midstream (SMLP) announces $250mm drop down acquisition of Bison Midstream, LLC in the Bakken Shale (press release)
    • Bison system consists of 300 miles of low-pressure and high-pressure gas gathering pipelines and six compressor stations
    • Minimum volume commitments from anchor shippers representing 80% of projected annual revenue
    • Was funded with $200mm of borrowings and $50mm of common units at $31.53/unit
  • Summit Midstream (SMLP) announces $210mm acquisition of a high pressure natural gas gathering system located in the liquids-rich window of the Marcellus Shale play from Markwest Energy (MWE)
    • Assets, primarily located in Doddridge  County , WV, consists of over 40 miles of newly constructed gathering pipelines, two compressor stations with 21,000 horsepower of compression
    • Expected to close 6/30/13 to be funded with credit facility borrowings
  • Inergy (NRGY) announces completion of Tres Palacios header pipeline extension (press release)
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