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January 4, 2014

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MLP Week Thoughts: Two Up, Two Down

The Alerian MLP Index was up in the 2013 portion of the week and down in the 2014 portion of the week, to finish the strange 4-day week basically flat, while the S&P 500 was down 0.6%.  Commodity prices were down across the board, with oil plunging 6.1% week over week, but MLPs held up pretty well.
Weekly MLP Review_1-3-14
The first trading day of the year (Thursday), the MLP Index was down 1.2%.  That negative close was the first time the initial trading day of a year has been negative for the Alerian MLP Index since 2007, and it was the second worst opening day ever.  It doesn’t seem like there is much correlation between the opening day of the year and the ultimate full year returns, but if you want to try to read through past opening days for any connection on your own, below is the data of the first trading day of the year for the Alerian MLP Index and the full year total returns of those given years, going back to 1996, ranked by worst opening days to best.
Opening Day_2014
Short post this week with a lot of pictures, expect a more lengthy post next week, and expect the MLP press release machine to ramp up then as well…
Winners & Losers
Two small cap refined products pipeline MLPs, WNRL and DKL, were up big this week, not much else in the way of a trend.  It was interesting to see the wide range of returns in either direction for a basically flat overall week for MLPs.  The week was split between 2013 and 2014, which might have something to do with the range, because there is an tax strategy that comes into play in the final month or so of the year and the first month or so of the year.  December is when investors are more inclined to sell losers, perhaps to pair with winners to offset some gains.  January is when investors would prefer, all else being equal, to sell their winners, because waiting a few days to sell in 2014 means the tax on that sale doesn’t happen until the next year (in this case calendar 2015).  Some of those year-end quirks, along with the mid-week holiday, made for some interesting trading.


The year to date chart below is based on a shorter time period than the chart above, and it represents a clean slate of winners and losers.  High flyers from last year are the early biggest losers (MPLX, AMID, HCLP  and VLP were all up big in 2013), which goes to my point above of how early in a year that follows a huge up year, the sales of winning trades are noticeable.   On the winning side, its very early, and besides WNRL and DKL having a similar size and corporate sponsor situation, there aren’t any discernible trends so far.


News of the (MLP) World
There was one more acquisition announced this week, a buzzer beating deal announced on the second-to-last day of the year.  Not much else to report, although Enable Midstream (not yet publicly-traded MLP joint venture between Centerpoint and OGE Energy) found their CEO among the executives at Enterprise Products Partners (EPD) (read more here).
M&A / Growth Projects

  • Vanguard Natural Resources (VNR) announces $581mm acquisition of natural gas and oil properties in the Pinedale and Jonah fields of Southwestern Wyoming from Anadarko Petroleum (APC) (press release)
    • Properties consist of 87,000 gross acres (14,000 net acres)
    • Currently producing 113.4 MMcfe/day (80% natural gas, 16% NGLs, 4% oil)
    • 43% proved developed, 970 proved undeveloped (PUD) drilling locations
    • Reserve life of over 20 years based on estimated proved reserves of 847 Bcfe
    • This acquisition marks a change in VNR’s strategy as it will be the first time VNR allocates capital towards a growth drilling program
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