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July 28, 2013

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MLP Week Thoughts: The Phillips 66 of IPOs

MLPs and the market ended the week with close to no change.  The MLP Index was up Monday, down Tuesday-Thursday, before a small rally Friday.  10-year treasuries sold off, sending rates slightly higher.  Oil prices were down around 3%, and natural gas is back down in the mid $3.00/mmbtu range.  NGL prices and gold rallied a bit, but remain well below their prices at this point last year.
Weekly MLP Review_7-26-13
There were, however,  some massive price movements outside of the MLP index the likes of which we have probably never seen.  Phillips 66 priced at the lowest yield ever, and kept going up.  I’ve already spent a blog post talking about its IPO price and first trading day, but PSXP kept going up from there, closing the week nearly 50% higher than its IPO price, so it probably warrants further discussion, and a nod to one of their ad campaigns in the video below.

Also, on cue, another refinery company filed to take their midstream assets public (Western Refining) and another (Valero) is seriously considering it.  If you can take some part of your overall business that trades at an earnings multiple of under 10x, spin it off at a 27x distributions multiple and watch it trade to 40x, why not form an MLP?  Any public company with assets fit for the MLP wrapper (halo) that isn’t planning an IPO at this point (is late to the party) should be working on their MLP IPO plans.
Winners & Losers
Other MLPs were on the move too this week.  EROC bounced back after several rough weeks with a big 9.9% gain.  SXCP and ARLP were up on distribution increase announcements.  PVR led the losers on weak second quarter results.  XTEX and NGLS both dropped, but both remain up more than 35% for the year.


For the year, EROC’s big week pushed it out of the bottom five for the first time in a few months, but upstream MLPs remain well represented in the bottom five with EVEP, LINE and LRE.


Variable distribution MLPs (+1.5%) were a bright spot this week, as shown in the chart below.  GP holding companies (+28.6 YTD on average) held their lead on the MLP index and the S&P 500.
I spent the week at Guzman HQ in Coral Gables, wandering around the Miracle Mile.  Between that and several of my covered MLPs reporting next week, I am spent, so that’s going to be it for commentary this week.  News is below, here is wishing you all a good week, especially those money managers that are overweight upstream MLPs and need a big rally to make their month.
News of the (MLP) World



  • July 25: Marlin Midstream (FISH) prices upsized initial public offering of 6.875mm common units at $20.00/unit (7.00% yield), $137.5mm in gross proceeds
    • Closed its first day of trading at $19.50/unit (-2.5%)
  • July 22: Phillips 66 Partners (PSXP) prices upsized initial public offering of 16.43mm common units at $23.00/unit (3.70% yield), raising $377.8mm in gross proceeds
    • PSXP rose 29.3% on its first trading day and was up big Friday as well, finishing the week up 49% (and at a 2.47% yield)
  • Western Refining Logistics (WNRL) files S-1 to raise up to $287.5mm in an MLP IPO (initial S-1 filing)
    • Another public refining company forming an MLP for its midstream assets
    • Valero is also considering an MLP (Valero once controlled its own MLP that came with its acquisition of Ultramar Diamond Shamrock in 2001, and that MLP became NuStar Energy, LP once Valero sold its stake in NSH)


  • Atlas Resource (ARP) prices $250mm of 9¼% senior notes due 2021 at 99.97%
    • Stating the obvious: interest expense can spike pretty high when small upstream MLPs term out their debt


  • Genesis Energy (GEL) announces $230mm acquisition of downstream transportation assets of Hornbeck Offshore Transportation (press release)

Distribution Announcements
47 MLPs announced their distributions this week, around half of all MLPs.  Of those that reported this week, 32 announced distribution increases, but none as high as ATLS, which raised 41.9%, after its subsidiaries MLPs each raised more than 5%. So if the IPOs were the sizzle this week, the distribution growers below were the steak.

  • Increases (quarter over quarter):
    • ATLS: $0.44, +41.9%
    • SDLP: $0.4175, +7.7%
    • ARP: $0.54, +5.9%
    • APL: $0.62, +5.1%
    • MMP: $0.5325, +4.9%
    • SXL: $0.60, +4.8%
    • MPLX: $0.2850, +4.6%
    • ACMP: $0.485, +3.7%
    • SMLP: $0.435, +3.6%
    • NGL: $0.49375, +3.4%
    • AHGP: $0.785, +3.0%
    • DKL: $0.395, +2.6%
    • SXCP: $0.4225, +2.4%
    • BKEP: $0.12, +2.1%
    • RRMS: $0.44, +2.3%
    • MCEP: $0.515, +2.0%
    • ARLP: $1.1525, +2.0%

    • WPZ: $0.8625, +1.8%
    • HEP: $0.485, +1.6%
    • ETE: $0.655, +1.6%
    • SEP: $0.50875, +1.5%
    • OKS: $0.72, +1.5%
    • DPM: $0.71, +1.4%
    • NRGM: $0.40, +1.3%
    • USAC: $0.44, +1.2%
    • MWE: $0.84, +1.2%
    • RGP: $0.465, +1.1%
    • GLP: $0.5875, +0.9%
    • LGCY: $0.58, +0.9%
    • STON: $0.60, +0.8%
    • CLMT $0.685, +0.7%
    • MMLP: $0.78, +0.6%
  • Variable: RNF ($0.85), UAN ($0.58), CVRR ($1.35)
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