MLPs bounced back this week, helped by conference buzz and lack of equity issuance. The MLP Index was up 0.9% for the week and is up 23.7% including distributions for the year so far. The broader U.S. stock market paused this week, down 1.0%, after even broader global market showed some volatility (particularly in Japan). Commodity prices were mixed, natural gas and ethane were both up, but oil was down. 10-year treasury yield broke above 2.0% and gold was up big.
While there were no public equity deals, there was almost certainly primary equity issued this week from the at-the-market equity distribution programs that most of the larger MLP have in place. At these prices, those ATMs have been very active, but the data flow is difficult to track and we really only hear about ATM issuance in quarterly reports of individual MLPs. In any event, there was more demand than supply for MLP units this week.
A few notes on the MLP Index’s current yield and MTD performance:
Participation Up: The NAPTP conference was this week in Stamford. It’s just a two day conference, but its a manic two days. With 61 MLP presentations along multiple presentation tracks, it is physically impossible for one person to take it all in during the conference. NAPTP.org has audio webcasts of conference sessions online, which helps (although a few session webcasts are not available, like LINE’s). But the way most MLP asset management firms handle the information overload is by bringing several people. Kayne Anderson had 9 professionals at the conference, Salient had at least 5, Goldman Asset Management had at least 3, HITE Hedge had 3. For banks, its the same thing. There were herds of bankers from Barclays, UBS, Merrill Lynch, Wells Fargo, etc. I didn’t see too many Citi bankers there, but they’ve got their own private conference in Las Vegas in August. Also, there was more press at the conference this year than I remember before. The biggest group of conference attendees from the management team of an MLP was NRGY/CMLP this year (I counted 8, including 5 from NRGY).
Mood Varied: Long time MLP investors are cautious with valuations like they are. One institutional investor that manages $150mm made the comment that he has a nose bleed at these valuations. The problem is cautious early MLP investors are getting swept higher by much larger new capital inflows than the sector has ever seen. The new money and the market doesn’t care if higher prices make you nervous. MLPs are on a capital inflow ski lift right now. Maybe if you are hiking up a mountain and the altitude makes your nose bleed, you might stop and take a break. But when you’re on a lift, a nose bleed may make you feel uncomfortable, but you can’t stop, unless you jump out or the lift breaks.
Conference Quibbles: If I had my way, the conference would be longer than 2 days, it would be located within a 30 minute drive from a major airport, it would be in a hotel with a bar big enough to accommodate the MLP crowd, and would have more time for Q&A in the main halls as opposed to breakout sessions. But it’s still the best MLP conference there is because it attracts nearly everyone in the sector and is a great place to re-connect with everyone.
Broad Take-Aways: I met with several MLPs in 1-on-1 sessions (which were usually 2-on-1 or 3-on-1). Lots of discussion about rail. The consensus seems to be that rail will be a big part of the solution for a while in North Dakota. Despite the recent lack of upstream MLP deals, upstream MLPs universally said that deal flow was still expected to be robust in the back half of 2013. Crude oil transportation is still fundamentally robust. Ethane rejection continues, propane exports are having an impact on propane, but MLPs are not optimistic about the prospects for ethane for the next few years. Several MLPs were touting recent deals, while other MLPs badmouthed those recent deals, usually having been involved in the auction. I’ll save my individual MLP take-aways for research reports.
Winners & Losers
TLLP shot up big this week (disclosure: long TLLP), perhaps just a slow burn of appreciation for its latest acquisition announcement last week. There is no discernible trend among the top 5, all pretty different MLPs. Same thing on the MLPs that were down for the week. TLP was notably in the bottom five for the second straight week.
TLLP and BPL pushed into the top five YTD performers this week. Both also joined the swelling number of MLPs that have produced 50%+ total returns in 2013 so far (now 11 MLPs). No change among the bottom 5 constituents week over week.
News of the (MLP) World
Articles and Other News
M&A / Growth Projects