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November 17, 2013

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MLP Week Thoughts: Unimpressive Rebound

MLPs were up this week overall (Alerian MLP Index up 1.1%), but their streak of under-performing the S&P 500 (up 1.6% to fresh highs) extended to 6 weeks.  Interest rates were slightly lower week over week, presumably on the hope that Janet Yellen’s appointment could mean continued low interest rates and generally accommodating policy.   Barring a big move in MLPs or a dramatic selloff by the S&P 500, this will mark the second straight year that the MLP Index under-performs the S&P 500.  After a 10+ year out-performance streak, investors are probably not going to complain about a 25% total return year that under-performs.

Weekly MLP Review_11-15-13

FYI, I moved to the Philadelphia suburbs yesterday.  Not sure what form this blog will take going forward, but the stated intent is for me to produce a weekly commentary on the MLP space for CBRE Clarion that is somehow integrated with this website.  But don’t be alarmed if that takes a week or two to implement.
Winners & Losers
MWE’s drop this week was the most surprising and most discussed in MLP circles.  MWE dropped 5.8% on the week, but it was a roller coaster dropping 10.1% Wednesday, then rallying 4.1% Friday.  MWE was down on weak earnings and reduced guidance on slower ramp of Marcellus volumes, despite indications from producers in the area that production is up.  Analysts were thrown off by MWE earnings, and price targets were universally reduced, but I didn’t see any ratings changes (most still rate it a buy, some with more enthusiasm than others).  Most analysts believe MWE’s first mover advantage in the Northeast, large footprint, and strategy (staying out front of production growth with continuous expansion projects) will payoff in the long run.
EROC dropped 10% this week, and is now closer to $5.00/unit than $6.00/unit, following its distribution cut a few weeks ago.  Not sure what can be done to salvage the situation, but I expect some kind of strategic announcement there in the coming months.  XTEX continued higher this week, still climbing after the Devon combination announcement.  CLMT clawed back some of its losses from last week (it was down 12%+last week), same thing with CPLP, which was down 8.25% last week.
Not pictured below, NTI (+13.1%) and ALDW (+26.4%) were both up big, driving the variable distribution MLPs on average up 5.6% week over week.
On the YTD chart, not much has changed week over week, although SMLP was replaced by EQM in the top 5, and EROC continued to creep towards the bottom.
News of the (MLP) World
Quick summary on news: there are no IPOs on the road this week, but a tiny saltwater disposal well MLP filed its initial S-1.  Earnings and distribution ex-date season is pretty much over.  NTI’s GP is changing hands, which drove all refining MLPs higher, and LINE’s merger passed through another gate.



  • Dynagas LNG Partners (DLNG) prices IPO of 12.5mm common units at $18.00/unit
    • Original price range of $19-21/unit
    • IPO yield of 8.11%
    • Fourth straight IPO of less than midpoint pricing range, 6 out of last 7 MLP IPOs have priced below midpoint
  • Cypress Energy Partners (CELP) files registration statement for MLP IPO (SEC Filing)
    • Max offering size of $90.6mm
    • Led by three smaller underwriters (Raymond James, Baird and Stifel)
    • CELP provides saltwater disposal and other water services to onshore U.S. oil and natural gas producers
    • First water services MLP, will be closely monitored by others that would like to pursue an MLP with their water services assets
    • GP is owned by Cypress Holdings of Tulsa, which is a company owned by family of management
    • Rare MLP that is not affiliated with a private equity or publicly traded corporation
    • Has IDRs up to 50%, and subordinated units
  • Breitburn Energy (BBEP) prices public offering of 16.5mm common units at $18.22/unit, raising $300.6mm in gross proceeds (press release)
    • Overnight offering, priced at 4.4% discount to prior closing price, and traded up in each of the next 3 trading sessions to finish the week just above pre-offer price
  • American Petroleum Tankers withdraws IPO, after filing for an IPO less than a month ago, and did not give a reason (Wall Street Journal)
  • Cheniere Energy Partners LP Holdings, LLC (CQH) and Valero Energy Partners (VLP) update IPO prospectuses, but no price range (and therefore no imminent offering), so looks like we’ll get a break from the cascade of IPOs (5 of last 6 weeks have had IPOs)


  • Williams Partners (WPZ) prices offering of $1.0bn of senior notes, including $600mm of 4.5% senior notes due 2023 at 99.396% of par, and $400mm of 5.8% senior notes due 2043 at 99.339% of par
  • Energy Transfer Equity (ETE) prices upsized offering of $450mm of 5.875% senior notes due 2024 at par
    • Proceeds, along with credit facility borrowings will fund previously announced tender offering of 7.5% senior notes due 2020

M&A / Growth Projects

  • NuStar Energy (NS) announces it will proceed with phase II of its South Texas Crude Oil Pipeline System Project
    • Will add another 65,000 bbls/d of capacity once complete in 1Q 2015
    • Expected to add $40mm in incremental EBITDA
  • NuStar Energy (NS) announces plans to finalize agreement to exit the asphalt joint venture it has with Lindsay Goldberg
  • Linn Energy (LINE) announces that the SEC has declared its S-4 effective for the proposed merger of LNCO and BRY, proxy materials are being mailed (press release)
    • Shareholder meetings on December 16th are the next important date for this marathon merger process
  • Susser Holdings and Susser Petroleum (SUSP) announce agreement to acquire SUSP to acquire Sac-n-Pac convenience stores and fuel distribution contracts (press release)
    • SUSP will acquire the third party fuel supply contracts and will supply motor fuel to the convenience stores
  • New Source Energy (NSLP) announces acquisition of oilfield services company MCE, LP for $3.8mm in cash and 1.8mm common units for total price of approximately $43.6mm (press release)
    • MCE is owned in part by NSLP’s CEO
  • Western Refining (WNR) announces acquisition of the GP and common units of Norther Tier Energy (NTI) from private equity sponsors ACON Investments and TPG for total consideration of $775mm (press release)
    • WNR’s org chart gets incrementally complicated, as it will own the GP of a variable refining MLP to go along with its GP stake in its refined products logistics MLP, WNRL


  • MPLX’s President Garry Peiffer to retire on Jan 1 (press release)
  • Suburban Propane (SPH) announces its President and CEO Michael Dunn to retire in April 2014, to be replaced by CFO Michael Stivala, as per SPH’s succession plan (press release)
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