Busy week in the MLP space…issuers and bankers are doing everything thing they can to throw prospectuses through the capital markets window before it closes. So far, deals are sailing through without any problem.
For historical perspective on that volume, the $4.5 billion in debt that priced this week is more than twice as much was issued in all of the second quarter, as shown below. It also represents about 70% of the total MLP debt issued in 2008. The equity priced this week more than doubled the total issued so far this quarter.
So, MLPs issued a ton of debt and equity, well what else is new? Well, the good news is MLPs held up well (up 0.6% this week), no doubt helped by a benign broader market. Given the backlog of MLP equity discussed here ad nauseum, any positive reinforcement (i.e. when heavy issuance is met with not so heavy stock prices), is going to open the issuance faucet a bit more. On the bright side, by this time next week, there will be one less MLP IPO in the queue (barring another filing in the meantime). With each decline in the expected supply of equity, MLP prices get a little lighter, and start to float a bit.
Oh, and there were around 30 MLP earnings releases this week. Not many revelations, at least so far in my sifting through all the releases. Crude oil focused MLPs like PAA and TLLP continue to put up solid results, commodity price sensitive gathering and processing MLPs like XTEX and CMLP not so much. And, this year’s biggest winner by far, RNF, raised 2012 guidance, so no doubt it will pop another 6% next week [sarcasm, not a prediction, fyi].
I don’t know what to make of energy commodity prices. Oil futures were up 1.6% on the week, reaching their highest point since mid-May on Tuesday, before settling at around $93 Friday. Natural gas price futures dropped 5.9% on Friday. Propane and ethane were both up on the week. Most management teams that were hurt by lower NGL prices last quarter expect NGL prices to recover between now and the end of the year.
Demand for oil seems to be slowing globally, and E&P companies have now shifted their focus to producing as much oil as possible, and yet oil prices continue to levitate. We’ll see if that continues, but I think more oil production growth, less demand and a strong dollar will eventually send oil prices below $85 per barrel for a significant part of 2013. Adjust your MLP portfolio accordingly, but unless oil prices break to below $70 per barrel and stay there for 6 months, the oil infrastructure MLPs will remain busy, and for MLPs busy = good.
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