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July 30, 2012

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MLP Week Thoughts: Muddling Through Earnings Season

MLPs 5 week streak ends, MLPs down 1.2% on a total return basis this week, compared with +1.7% for the S&P 500, and +2.8% for gold.  MLPs were dragged down by oil, natural gas and NGL price declines.   The MLP Index has returned a total of 4.4% year to date and 16.0% year over year, compared with 11.5% (YTD) and 8.6% (year over year) for the S&P 500.  Even with its decline this week, natural gas prices have actually increased this year, compared with -9.7% for oil, -35.8%for propane and -52.9% for ethane.

I’m way behind this week, so will just stick with the news.  Lots of earnings coming this week.  Good luck out there.

News of the (MLP) World

  • Northern Tier Energy LP (NTI) prices IPO at $14.00 per unit, well below the $19.00 to $21.00 price range
    • NTI is a variable distribution MLP
    • NTI finished the week up 4.6%
  • Busy week for CMLP
    • $90mm acquisition of Barnett Shale gathering and processing assets from Devon for $90mm (press release)
      • 20-year fixed-fee gathering, processing and compression agreement with 20,500 acre dedication with Devon
      • Assets in western portion of Johnson County in Texas
    • Follow on equity offering raises $104mm, to reduce borrowings on revolving credit facility, which will then be used to borrow funds to fund acquisition above (press release)
    • 2Q Earnings pre-announcement (press release)
      • EBITDA guidance for 2Q between $28 to $29mm compared with estimates of around $30.3mm
      • Lower 2Q EBITDA a result of lower gathering volumes quarter over quarter, which was a result of combination of production related factors
    • Updated full year guidance (press release)
      • Now expects $125mm to $130mm in EBITDA for 2012, compared with prior guidance of $135mm to $140mm
      • Lower EBITDA result of delays in well completions and moderated drilling activity in dry gas areas
  • OKS announces $1.0bn in new growth projects (press release)
    • Projects announced last week include: new NGL fractionator at Mt. Belvieu, new natural gas processing facility in Bakken Shale, expansion of Bakken NGL Pipeline, and new Ethane / Propane splitter at Mt. Belvieu
    • Announced growth projects through 2015 now total $5.7bn to $6.6bn for OKS, including:
      • $1.8-$1.9bn for natural gas gathering and processing projects
      • $2.4-$2.9bn for NGL projects
      • $1.5-$1.8bn for crude oil projects
    • EBITDA multiples expected to be 5x to 7x
    • $2.0+ bn of additional unannounced growth projects currently being evaluated by OKS
  • CVR Energy Corporate News
    • CVR Energy, Inc. (CVI), parent of UAN, finds no buyer after searching for 60 days, Carl Icahn to maintain his stake (press release)
    • CFO Frank Pici resigns and is replaced by internal promotion of assistant treasurer and chief accounting officer Susan Bell (press release)
  • Notable Earnings
    • LINE disappoints on lower NGL realizations, coverage at 0.97x in 2Q, expected to increase through the end of the year
    • PVR earnings disappoint on weaker coal results, despite strong growth from midstream segment
    • ARLP earnings beat expectations, but cuts guidance on weaker met coal demand
    • NS earnings disappoint, EBITDA lower than expected, asphalt loss weighs on results, better 2H expected
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