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December 15, 2012

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MLP Week Thoughts: Same S**t Different Week

MLPs were down 1.7% this week, falling well short of the broader market for the second straight week.  MLPs are getting close to their post-election low.  Yields on 10-year US Treasuries rose this week, oil was up 1.0% and natural gas dropped 7%.  Ethane prices reached a new multi-year low closing today at $0.226 per gallon.

Weekly Review_12-14-12

There is MLP chatter out there trying to figure out what’s going on with MLPs, when the bleeding will stop, who is selling, etc.  Institutional selling by hedge funds facing redemptions is one theory on why MLPs keep falling.  The chart below is meant to try to figure out if that’s the case.  Large institutions tend to trade in blocks larger than 1,000 units, whereas less than 1,000 units is indicative of retail trades.  In the past 2 weeks, around 81% of the trades in the top ten most active MLPs have been less than 1,000 units.  In the week prior to the election, 83% of the trades were less than 1,000 units.  So, on the whole there has been a shift to more institutional trading.
At an individual MLP level, its clear that EPD, LINE and BPL had some heavy institutional selling last week relative to this week and to the pre-election week.  And this week, KMP’s big block trading is a result of its block trade offering this week.  Other than KMP, however, there are no real anomalous numbers below from this week.  So, the conclusion one might draw from that data that yes last week there were some large institutions unloading some of the larger MLPs in blocks.  But not so much this week.

Trading Stats

I don’t have much else to say today.  My heart’s not in it.  I have a daughter in kindergarten at a public school in Austin.  This morning, while the Newtown, CT shooting was happening, I was at an assembly watching my daughter get recognized on stage at her school.  We’ve been concerned about the public school program due to its general lack of funding and overcrowding of classrooms and teaching to lowest common denominator.  We’ve considered home schooling our 3 kids, something I would have dismissed out of hand a few years ago.  But the home school option sounds more reasonable tonight.
Winners & Losers
MPLX was in the top 5 for the 3rd straight week, XTEX (and XTXI) both popped this week.  LGP was the biggest winner after its earnings release Monday.  OXF took the bottom spot again this week, with 11.7% decline week over week.


 MPLX crept into the top 5, other than that, no changes to the names on the YTD winners and losers chart.


 MLPs are still up for the year, but no by much.  MLP GPs are keeping pace with the broader market.


News of the (MLP) World

  • Access Midstream (ACMP) prices upsized public offering of 16.0mm common units at $32.15/unit, raising $514.4mm in gross proceeds (press release)
    • Offering upsized 16.4% from 13.75mm units originally
    • One day book-build, with file-to-price decline of 5.5%
  • Kinder Morgan Energy (KMP) prices spot public offering of 3.9mm common units at $78.60/unit, raising $306.5mm in gross proceeds (press release)
    • Priced at 2.41% discount to prior close
  • Phillips 66 (PSX) announces plans to file for MLP IPO in second quarter of 2013 (Fuel Fix article)
    • Expected to be $300mm to $400mm in gross proceeds
    • New MLP will be growth vehicle for Phillips 66’s midstream assets, with proceeds from drop downs going to fund growth at the corporate level


  • Access Midstream (ACMP) prices offering of $1.4bn of 4.875% senior notes due 2023 at par (press release)

M&A / Growth Projects

  • Access Midstream (ACMP) announces acquisition of Cheasapeake Midstream Operating, LLC for $2.16bn, announces GP buy in by Williams Companies (press release)
    • Concurrent with the acquisition, Williams Companies (WMB) will acquire 50% of the general partner of ACMP and 34.5mm of ACMP subordinated units from Global Infrastructure Partners (GIP)
    • Acquisition to be funded with proceeds from $1.4bn debt offering and $514.4mm equity offering priced this week, backstopped by WMB and GIP equity commitments
    • Acquisition adds natural gas gathering and processing assets in the Eagle Ford, Utica and Niobrara liquids-rich plays and expands ACMP’s position in both the Haynesville and Marcellus dry gas plays
  • NuStar Energy (NS) announces $100–$120mm expansion to its Eagle Ford crude oil pipeline system and new Corpus Christi terminal (press release)
    • NS will construct new crude oil pipeline, a 100,000 barrel terminal and a new ship dock around its existing assets
    • NS expects to invest $100mm to $120mm in the project, which should generate ~$15mm in annual EBITDA
    • Project backed by 10-year throughput and services agreement with ConocoPhillips
  • Teekay LNG (TGP) announces the order of two LNG Newbuildings that will be chartered on long-term contracts (press release)
  • Plains All American Pipeline (PAA) announces completion of acquisition of crude oil and condensate gathering assets in the Eagle Ford shale from Chesapeake Energy for $125mm (press release)
  • Kinder Morgan Energy (KMP) announces sale of its 1/3rd interest in Express-Platte pipeline system to Spectra Energy Corp for $380mm (press release)
  • BreitBurn Energy (BBEP) announces two acquisitions of oil and natural gas properties in the Permian Basin for combined purchase price of $190mm (press release)
    • Assets to be acquired from CrownRock, L.P. and Lynden USA Inc.
    • 13.6MMboe acquired, with reserve life index of over 18 years and average daily net production of 1,850 Boe/day
  • Tesoro Logistics (TLLP) announces acquisition of Chevron’s Northwest Products System for $400mm (press release)
    • Northwest Products System includes:
      • The Northwest Product Pipeline, a 760-mile FERC-regulated common carrier refined products pipeline from Salt Lake City, Utah to Spokane, Washington
      • A separate five-mile jet fuel pipeline to the Salt Lake City Int. Airport
      • Northwest Terminalling Company, consisting of 3 refined products terminals
    • TLLP expects the acquisition to be immediately accretive to distributable cash flow per unit and to generate $33mm in annual EBITDA in the next 12 months, implying a 12.1x multiple
    • First third party acquisition for TLLP
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