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April 5, 2014
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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.
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.
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.
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.
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.
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.
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.
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…
Equity
Debt
M&A / Growth Projects
Other