MLPs had a rough week, down 1.6%, which was slightly better than the S&P 500 (down 1.8%).  The situation in Syria seems to be having a positive impact on oil prices and a negative impact on the U.S. stock market.  U.S. military action would probably continue those two trends.  Next week’s August jobs report will be the next thing people talk about driving stock market performance, as plenty of people will use that as a barometer (at least for that day) of whether the economy is doing well enough for the Fed’s to go through with plans to reel in some of that QE we love so much.  For MLPs, expect the equity capital markets to open up again maybe next week, but definitely in the weeks that follow, which may pressure the space as we close the quarter.  NGL prices have picked up of late though, and that should have a positive impact on 3Q earnings for many MLPs.

With the 1.0% drop Friday, MLPs were down 2.5% for August, making it the worst month of the year so far, narrowly beating the 2.1% drop we saw in May.  September on average has been the third worst performing month of the year over the years, producing 0.13% total return on average in the 17 years of the MLP Index.  However, the average for the 5 Septembers that immediately followed a negative August is 3.3%.  In order to do that, MLPs will need to string more than one positive week in a row together, which hasn’t happened since the two middle weeks of June.

Recap of the MLP Index total return for various recent time periods:

• This week: -1.6%
  • Last week: +1.5%
  • Week ended 8/16: -2.1%
  • Week ended 8/9: +0.1%
  • Week ended 8/2: -1.5%
• August: -2.5%
  • July: -0.5%
  • June: +3.1%
  • May: -2.1%
  • April: +0.9%
• 3Q so far: -3.0%
  • 2Q 2013: +2.4%
  • 1Q 2013: +19.7%
  • 4Q 2012: -3.4%
  • 3Q 2012: +8.9%
• 2013 Year to Date: +18.4%
  • 2012: +4.8%
  • 2011: +13.9%
  • 2010: +35.9%
  • 2009: +76.4%

Winners & Losers
PNG moved higher on the news of the offer from PAA.  There was no other news around the MLPs that made the top 5 and bottom 5, but a huge block of units traded in MWE Thursday, which may have been some of the secondary units registered in the ATM program filed in August.

No changes in the constituents or order of the  YTD winners and losers chart this week.

News of the (MLP) World
Equity

• BWP files equity distribution agreement to sell up to $500mm of equity at the market

M&A / Growth Projects

• PAA Natural Gas Storage (PNG) receives buyout offer from parent Plains All American (PAA) for acquisition of all PNG’s outstanding publically-held common units through a unit-for-unit exchange that values PNG at $22.74/unit (press release)
  • In the 3 and a half years since PNG went public, they paid a total of $4.44/unit in distributions, with distributions growing 5.9% from the original minimum quarterly distribution at IPO
  • Total return from its $21.50/unit IPO to its $22.74/unit offering price would be 26.4%
    • From PNG’s IPO (4/29/10)  til today, PAA’s total return is 94.8% and the MLP Index’s is 71.1%, good trade for PAA
    • Chances are given how good PAA management has been over the years that immediately following the close of the transaction, natural gas will shift back in their favor

• ONEOK Partners (OKS) announces $305mm acquisition of natural gas processing facility and related infrastructure in Powder River Basin area of Wyoming. OKS to invest additional $135mm to upgrade and expand the assets (press release)
  • Looked like an expensive acquisition in terms of 2013 and 2014 EBITDA multiples, but EBITDA is expected to ramp from $20mm in 2015 to $60mm by 2018
  • Acquisition won’t need another equity deal after their 8/7 offering, and the transaction is small enough that its high price won’t have much of an impact on results near term.

• Genesis Energy (GEL) announces new crude oil unit train unloading facility in Louisiana, expected to cost less than $75mm to construct and to include 400,000 barrels of new crude oil storage (press release)

Other

• LRR Energy (LRE) files S-3 to register up to $400mm of primary debt and equity securities and $128.1mm of secondary equity (sponsor-held common and subordinated units)

Distribution Announcements

• Flat: VNR (Preferred): $0.1641, LINE:$0.2416