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March 16, 2012

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MLP Winners & Losers: Latest Atlas Ticker Takes Off

MLPs were down 1.9% and underperformed the market by more than 400 basis points this week, the worst showing for the year by far.  Interest rates jumped this week to their highest level since August 2011, which did not help MLPs.  The S&P 500 had its best week of the year, up 2.4%, helped by 7.4% rise in AAPL on the week.  Gold was down 3%, probably a result of indications out of the Fed this week that have people believing QE3 won’t happen, and the lack of European financial distress news this week.

Atlas has had so many public companies and associated company names, it can be difficult to keep track.  This week, Atlas Resource Partners, L.P. ($ARP) was spun out of $ATLS, and then ARP announced Friday an acquisition of 277 bcfe of reserves for $190 million ($0.69 per mcfe).  ARP also announced 2013 distribution guidance that is 45% higher than its 2012 full year distribution guidance.  That press release sent ARP flying, up 31.6% on Friday, and 25.8% for the week.  Another big winner Friday was GEL, up 6.2% on Friday on no news.
On the loser side, propane and coal were the dominant themes.  APU issued equity and its 5% distribution increase announcement wasn’t enough to keep it from dropping.  FGP has not increased its distribution ever since its 1995 IPO, and so it trades like a bond, and this was a bad week for bonds.  KMP is rarely on the loser list, but finds itself there this week, largely over the announcement that KMP would need to sell an estimated $3.5-$4.0 billion of assets at less than ideal prices, which will cut into accretion from the El Paso merger.  More on KMP in my Week Thoughts post, but its action this week was also probably a result of money leaving MLP ETFs due to rising rates.

MLPs remain positive for the year to date, but are now WAY behind the S&P 500 for the year.  General partner holding companies are still performing well, helped by ATLS’s 7.7% increase this week.  The S&P 500 reached 1400 for the first time since 2008 this week.  Chances are, however, with the S&P at such great heights and MLPs struggling, that from today until the end of the year, MLPs are more likely to outperform.  Its a good time to trade out of stocks (except AAPL) and into MLPs, unless you think the 10 year treasury is going to break above 4% this year.

For the year, ARP has miraculously been a public company for less than 2 weeks, and it has the highest price change in the MLP space so far this year. OXF extended its loss lead among the losers, the bottom 3 of which remained unchanged from last week.  EROC and CMLP escaped the cellar this week, replaced by SPH and ARLP.  The bottom 5 is now exclusively coal and propane MLPs.

 More coming up in Week Thoughts.  Thanks for reading, have a great weekend.

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