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December 21, 2014
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Relief of a potential floor in oil’s decline sparked a rally in MLPs this week. After three straight declining weeks capped by the worst week of the year, the Alerian MLP Index bounced 4.6%. MLPs beat the S&P 500, but they have fallen way behind for the year. 2014 will extend the MLP losing streak vs. the S&P 500 to two years, which has never happened before in 19 years of data.
Oil prices were volatile again this week, but did have some bright spots, including a sharp rally Friday afternoon that left its price basically flat week over week. Natural gas dropped 9% to below $3.50/mcf on mild weather. NGLs rallied this week, with propane and ethane both up after hovering near decade lows in prior weeks.
With holiday volume and limited news flow, volatility should continue through the New Year, and we may see MLPs trading up or down with oil, but with some upward pressure from investors trying to get in front of the January effect.
Winners & Losers
Even though oil prices had a couple of positive days and upstream MLPs traded well, only 1 of the top 5 this week was an upstream MLP (VNR). The others were MLPs that had been dropped precipitously in prior weeks, despite not carrying as much commodity price exposure, like SMLP and NGL. NGL and NKA were in the bottom 5 last week, and swung hard the other way this week on no news. There was no pattern among the bottom five, other than they are all midstream MLPs and only one of them is in the Alerian MLP Index (TCP).
Year to date, TCP dropped out of the top five this week, while upstream MLPs and those who have cut their distributions dominate the bottom 5.
News of the (MLP) World
This week, we got the final IPO of 2014. The final tally was 18 MLP IPOs this year (not counting NextEra Energy Partners, which is a yieldco and Landmark Infrastructure Partners, which I view as a real estate/financial MLP), 1 shy of the record from last year of 19. Also, 2014 ended the streak of 4 straight years of at least 1 GP IPO. Expect more than one GP IPO next year, but more on that in a few weeks when we release the 2015 prop bet lines.
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M&A / Growth Projects
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