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June 29, 2013

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MLP Week Thoughts: Super Bounce Paints Quarter Green

MLPs bounced back this week after 2 straight negative weeks.  The Alerian MLP Index was up 4.7%, the most since the first week of 2013, but the Index would need to go up another 1.6% to get back to its May 28th recent high.  US 10 Year rate held firm this week below 2.5%, which helped the MLP Index vastly outperform the broader stock market, despite closing at its lowest point since March on Monday.
Tuesday through Thursday were euphoric, with the MLP Index rising 2.0% Tuesday, 2.1% Wednesday and 1.4% Thursday.  Back-to-back 2%+ days hasn’t happened since May 2010, and has only occured 8 times since 1996, with 5 of those occurring in the late 2008, early 2009 volatility.  3 straight 1%+ days for the MLP Index has only occurred 22 times since 1996.  Some of the boost to the MLP sector was likely the result of the latest $1.0bn+ closed end MLP fund pricing on Wednesday.  That fresh capital (and a few other funds in registration) may support MLPs through a few more dog days this summer.
Weekly Review_6-28-13
Natural gas prices faltered this week, which can be attributed to several factors (as the Wall Street Journal outlined here), but essentially natural gas production (supply) keeps growing too fast for demand.  MLPs weren’t impacted this week, but we may see the impact in earnings season.Gold took another big loss this week, which is probably related to recent rate increases and persistently low inflation.

 (Photo: One happy MLP investor joins the bouncefest)

Outside of MLPs, its been a crazy week.  In Austin, we broke record high temperatures (106 degrees today, but its a dry heat…).  In Boston, sports radio hosts couldn’t be happier, but fans got some stunning signs that the recent Golden era of Boston pro sports may finally have come to an end.  Pats star (and apparent homicidal moron) Aaron Hernandez indicted for murder, Doc Rivers / Kevin Garnett / Paul Pierce all left town, the Boston Bruins lost a heartbreaking game 6…oh, an just last week ex-Celtic hero Ray Allen hit a 3-pointer to save the Heat’s championship season.  In Washington, the Supreme Court made a ruling on gay marriage that has no impact on me whatsoever, but seems to make sense.
In the finance world, Case-Shiller home price index was up 12.1% yoy and 2.5% in April in its latest release, but I would bet that index will get a little more volatile when June numbers come in after the recent interest rate spike.  Jobless claims (346k), durable goods numbers (+3.6% in May), U.S. personal income (+0.5%), and consumer confidence (84.1) were all positive this week.  On the other hand, Q1 GDP growth was revised down (to 2.6% from 3.4%) and Chicago PMI came in below expectations, but nothing too serious came out on the negative side for the U.S. economy.
In the blogging world, my friend and former colleague Bo Ford at Lookout Capital has started putting his thoughts into the Internet, and his first post,”In Defense of Active Management” is an excellent read, and hope you’ll help encourage him to write more.
A Quick Update of MLP Index Total Return:
MLPs finished June +3.1%, a solid rebound from May’s 2.1% decline.  The second quarter also finished with positive results (+2.4%), and YTD, MLPs are up 22.1%, on pace for another strong year.

  • This week: +4.7%
    • Last week: -2.3%
    • Week ended 6/14: +0.7%
    • Week ended 6/7:  +1.4%
    • Week ended 5/31: -4.3%
  • June: +3.1%
    • May: -2.1%
    • April: +0.9%
    • March: +5.4%
    • February: +0.9%
  • 2Q: +2.4%
    • 1Q 2013: +19.7%
    • 4Q 2012: -3.4%
    • 3Q 2012: +8.9%
    • 2Q 2011: -2.3%
  • 2013 Year to Date: +22.1%
    • 2012: +4.8%
    • 2011: +13.9%
    • 2010: +35.9%
    • 2009: +76.4%

Finally, a note regarding this site: I’ve added a few new pages to that you can find on the header of this page or on the menu to the right (or here or here).  The first is an index of the posts I’ve made over the years that cover a specific MLP topic (i.e. not my these weekly updates).  It is a long time coming and will allow for easier locating of something you might be looking for.  The second page I added has a list of all MLPs, GPs, closed end funds, ETFs, ETNs, and open end mutual fund companies that I am currently aware of.  I’m working on a third additional page that will some capital markets tables (recent MLP IPOs, last 10 follow on offerings, pending IPOs), which I will try to keep up to date.
The efforts to improve the site took some time away from writing, apologies if this post seems short and half baked.
Winners & Losers
EROC had a rough week.  EVEP finally showed some signs of life as deals in the Utica are starting to happen around them.  OXF and CQP were the big winners.  Besides OXF, coal MLPs had a rough week, with RNO and NRP dropping significantly.


Year to Date
EROC dropped into the bottom five for the year this week.  No other changes in the bottom 5 or top 5 this week.


News of the (MLP) World


Again, not much capital markets activity this week, but don’t get too comfortable in a world without follow-on offerings, there is always something in the queue, but maybe not too much next week, which is essentially a 3 day week with July 4th.  M&A activity was light, with a few small deals.
Word finally got out about Hess selling its terminals business.  That will fetch at least $1.2bn based on what I’ve heard about the assets, but with a competitive auction it could be much higher.  Its fun to speculate who might be in the running, but it will be a big deal when it gets done.

  • Marlin Midstream Partners (Ticker will be FISH) files initial registration statement for $150mm MLP IPO (S-1 filing)

M&A / Growth Projects

  • SunCoke Energy (SXCP) announces acquisition of Lakeshore Coal Handling Corp for $29.6mm (press release)
  • Crosstex Energy (XTEX) and Crosstex Energy, Inc. (XTXI) announces re-activation of its Black Run rail loading terminal located in Ohio, allowing export of Utica Shale light oil condensate production (press release)
  • Crestwood Midstream (CMLP) announces acquisition of 50% interest in Jackalope Gas Gathering Services from RKI Exploration & Production for $108mm (press release)
  • Breitburn Energy (BBEP) announces acquisition of 35 mmboe of proved reserves and associated midstream assets from Whiting Oil and Gas Corp. for $860mm (press release)
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