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April 5, 2014

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Week Thoughts: April Flowers

The MLP Index was up 2.3% this week in a broad-based rally, and it was the best week for the index since late October.  It also marks the second straight week of large outperformance of the MLP index over the S&P 500.  The US 10 year interest rate was flat, despite rising as high as 2.80%, before dropping back down.  Energy commodity prices were largely down for the week, but NGL prices were mixed with propane up and ethane down.  There was no clear cut catalyst for MLPs to outperform to such a degree, it appears just to be a case of improving sentiment specific to MLPs.

Weekly MLP Review_4-4-14

I’m going to be long on charts and short on words this week.  I do have a day job, after all.
Monthly Recap
For a quick update on the madness of March, MLPs were up 1.5% for the month, making it the best month for MLPs so far in 2014.  TEP was the best performer in the month (+16.2%), and was in the top 5 for the second straight month. High growth and crude MLPs dominated the top 5, while upstream MLPs (LINE, MCEP, LGCY) filled out the bottom 5.  There were no repeats in the bottom 5 month over month.

Top5Bottom5_March14

Top5Bottom5_March14_Chart
MLPs started off April on a very strong foot this week, which if you have followed the Alerian MLP Index, is to be expected.  April has been a positive month for the index for 9 straight years.  As shown below, that’s far and away the longest current streak.  The longest streak ever (with the index data that goes back to 1996) was July, which was positive for 11 straight years from 1996 through 2006.
Consecutive Months
Below is an update to the best returning months for the MLP index ranked from best to worst.  April has been near the top of the list, but May is looming as typically a bad month for MLPs.
Monthly returns_April
Winners & Losers
A rising tide lifts all boats, including BWP (+7.4%), KMP (+3.7%) and EPB (+4.7%), which all showed signs of life this week.  Not all the laggards went higher, as EROC (-2.8%) is still beached.
Small cap compression MLP GSJK was up 15.9% on no news.  NGLS was up 9.9% (and up more than its sponsor TRGP) on its announcement that 1Q and 2014 results will be better than expected.  Not pictured in the chart below, variable distribution MLP EMES was up 12.0% Friday, 25.5% for the week, 63.3% year-to-date, and 325.9% in less than a year since its IPO at $17.00/unit on 5/8/13.

Top5Bottom5_4-4-14

Top5Bottom5_4-4-14_chart

Year to date, every one of the bottom five from last week improved this week, except for EROC.  LGCY dropped into the bottom five to replace SPH.  No changes week to week among the names in the top five, but GSJK catapulted to the top of the list at 44.0% total return for the year.  As noted above, variable distribution MLP EMES has outpaced everyone with 63.3% total return year to date.

Top5Bottom5_4-4-14_YTD

Top5Bottom5_4-4-14_YTD_chart

Updated IPO Backlog
It was a very busy week for securities attorneys working for MLPs.  Enable Midstream Partners launched its IPO, detailed of which are in the news section below.  Foresight Energy Partners filed an updated S-1 nearly two full years after its last filing, and for an IPO that will potentially be 3 times as large (up to $300mm in latest filings, vs. $100mm in original 2012 filing).  PBF Logistics, which had previously filed a bare bones registration statement back in August confidentially, has now made its first official public filing for its IPO.   These filings come on the heels of last Friday’s Dominion Midstream MLP IPO filing.
IPO Backlog_4-4-14
Also, not on the list above, Hoegh LNG Partners (owner of 3 floating LNG regasification units) has confidentially filed a registration statement for an MLP IPO.  In total, that’s 5 MLP IPOs that are much more real than they were a week ago, even if they were all expected to execute MLP IPOs at some point.  Also, not on this chart, Memorial Resource Development Corp (the GP of upstream MLP Memorial Production Partners) filed for an IPO of its own.
News of the MLP World
The news was all splitters and IPOs this week, with some debt deals sprinkled in…

News-of-the-World

Equity

  • Enable Midstream (ENBL) launches MLP IPO with 5.75% midpoint IPO yield (latest S-1)
    • Midpoint price of $20.00 would raise $500mm in gross proceeds
    • Implied equity value of $8.3bn and $10.2bn of enterprise value at IPO would make this the largest MLP at its IPO ever
    • Selling just 6% of the company, with sponsors Centerpoint, OGE and Arclight retaining the remaining units
    • Next 12 months projections: $848mm of EBITDA, $550mm of distributable cash flow, 1.15x coverage
  • PBF Logistics (PBFX) files initial S-1 to sell up to $100mm of common units in an MLP IPO (filing)
    • PBFX is a refined products subsidiary MLP of PBF Energy Inc. (NYSE: BPF)
    • Next 12 months EBITDA of $44.0mm
    • Initial assets include Delaware City Rail Terminal and Toledo Truck Terminal, and PBF retains several other crude and refined products logistics assets for eventual sale down to PBFX
  • Foresight Energy (FELP) files revised S-1 to sell up to $300mm of common units in an MLP IPO (filing)
    • Thermal coal mining operator, backed by Riverstone, FELP had filed its original S-1 in February 2012, and the last updated S-1 before this one was filed nearly 2 years ago
    • Next 12 months projections: $387.7mm of EBITDA, $190.8mm of distributable cash flow
  • Hoegh LNG Partners files confidential registration statement for MLP IPO of indeterminate size (Reuters)
    • Hoegh LNG Partners will own 3 floating LNG storage and regasification units
  • Sunoco Logistics (SXL) files  equity distribution agreement to sell up to $250mm of common units at the market (filing)
  • Memorial Resource Development Corp (MRD) files initial S-1 to raise up to $700mm in an IPO (filing)
    • MRD is the sponsor of upstream MLP Memorial Production Partners (MEMP), owning 50% of the IDRs and 8.7% L.P. units
    • MRD also owns 1.1 Tcf of proved reserves of its own

Debt

  • Sunoco Logistics (SXL) prices $1bn offering of senior notes in two tranches (press release)
    • $300mm of 4.25% senior notes due 2024 at 99.774% of par
    • $700mm of 5.30% senior notes due 2044 at 99.836% of par
  • Exterran Partners (EXLP) prices $350mm private placement of 6.00% senior notes due 2022 at 98.371% to yield 6.25% (press release)

M&A / Growth Projects

  • Magellan Midstream (MMP) announces plan to construct $250mm condensate splitter (press release)
    • Splitter will be constructed at MMP’s Corpus Christi terminal and will be capable of processing 50,000 bbls/d of condensate
      • Expandable by an additional 50,000 bbls/d
    • Splitter is supported by a long-term, fee-based, take-or-pay agreement with Trafigura AG
    • MMP to construct more than 1 mm barrels of storage, dock improvements and two additional truck rack bays at the terminal
    • Project expected to be complete and operational during the second half of 2016
  • Crestwood Midstream (CMLP) announces further expansion of its Willow Lake Project in the Permian Basin (press release)
    • Phase 2 of the expansion will include construction of a cryogenic natural gas processing facility with 20 mmcf/d capacity and additional gathering pipelines across the acreage dedications included in Phase 1
    • Phase 2 expected to cost $25mm to $30mm and is expected to be completed in 3Q14
  • Targa Resources Partners (NGLS) announces $115mm condensate splitter on the Houston Ship Channel, and 40 mmcf/d cryogenic processing plant in the Williston Basin (press release)
    • Splitter will be constructed at its Channelview Terminal, backed by a long-term, fee-based contract with Noble Group
      • Will have capability to split 35,000 bbls/d of condensate into its various components
      • Splitter is expected to be completed ~18 months after all permits have been obtained
    • The Williston processing plant in the Williston Basin will effectively double capacity to support Bakken and Three Forks shale plays
      • Plan could be on line before the end of 2014
    • These project updates were part of a press release in which NGLS also raised its 2014 EBITDA to a midpoint of $850mm, up 13% from its prior $750mm guidance midpoint on the back of strong demand and throughput at its LPG facility

Other

  • WMB explosion at natural gas liquids storage facility in Washington (Oregon Live)
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