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August 3, 2013

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Week Thoughts: Dog Days of Distribution Season Hit MLPs

MLPs were down for the third straight week, and this time the S&P 500 was up enough to overtake the MLP Index for YTD total return, which would have seemed nearly impossible a few months ago.  This sets up the possibility that the MLP Index will underperform the S&P 500 for consecutive years, which has not happened since the Alerian data started back in 1996.  But early August is typically weak with the distribution capture trading that happens each quarter.  Large recent equity issuance is starting to take its toll as well.  On the commodity front, oil was up again this week, edging closer to $110/bbl, which helped propane and heavier NGLs trade up.  Natural gas was down big and is edging closer to $3.00.  Expect MLPs to be heavy next week as well.

Weekly MLP Review_8-2-13

The dog days of summer caught up with the MLP space this week, and they’ve caught up with me, so I’ll make it a short post this week.
Winners & Losers 
OXF and PSE were up big, and NRP was down a double digit percentage.


For YTD total returns, there was a shake up at the top, with PSE taking the top spot from SMLP, and GLP joined the top 5.  EROC rejoined the bottom 5 after the its weak earnings.  No other changes to the bottom 5.


MLPs finished July with a total return of -1.0%, the second negative month of the year.  The MLP Index has averaged 4 negative months a year since 1996, so these things do happen from time to time.  August has not historically been a great month for the MLP Index, but it hasn’t been the worst average return month for the sector (November, May, September and February have all averaged weaker returns than August).

  • This week: -1.5%
    • Last week: -0.4%
    • Week ended 7/19: -0.7%
    • Week ended 7/12: +2.8%
    • Week ended 7/5: -1.1%
  • July: -1.0%
    • June: +3.1%
    • May: -2.1%
    • April: +0.9%
    • March: +5.4%
  • 3Q so far: 
    • 2Q 2013: +2.4%
    • 1Q 2013: +19.7%
    • 4Q 2012: -3.4%
    • 3Q 2012: +8.9%
  • 2013 Year to Date: +21.0%
    • 2012: +4.8%
    • 2011: +13.9%
    • 2010: +35.9%
    • 2009: +76.4%

News of the (MLP) World


Lots of action this week, including what I believe to be a record setting overnight equity offering by WPZ, a GP IPO filing, and several acquisitions.

  • Williams Partners (WPZ) prices offering of 21.5mm common units at $49.00/unit, raising $1.05bn in gross proceeds
    • The biggest overnight follow-on equity offering for an MLP ever as far as I know, with the overallotment option, it would be more than $1.2bn
    • It was just a few years ago that the total follow-on issuance for the entire sector for the entire year was less than $10bn, and it wasn’t until 2001 that MLP follow-on offerings totalled more than $1bn in a single year
    • WPZ to receive $1.05bn in gross proceeds, net of which will be used to repay commercial paper debt, to fund capital expenditures, and for general partnership purposes
    • Overnight offering priced at 6.0% discount to prior close, and traded up 1.6% in the next trading session
  • Teekay LNG (TGP) announces private placement of 0.93mm common units to an institutional investor for total proceeds of $40mm (press release)
  • Plains GP Holdings (PAGP) files initial S-1 for IPO of up to $1.0bn (S-1 filing)
    • PAGP will own an undisclosed interest in Plains AAP, L.P. the entity that owns the G.P. and IDRs of PAA
    • Plains GP Holdings did plan to go public back in late 2007, but pulled the IPO (original 2007 filing)
    • Looks like the streak of one MLP GP IPO per year will extend to a 4th year (WGP, KMI, TRGP)
      • Anyone care to venture a guess as to who is most likely to extend that streak to 5 in 2014?  CMLP would have been my pick, but they got their public GP with the NRGY deal.  There aren’t that many candidates left until some of the newer MLPs get into the highest IDR tier.  I think you have to start looking at MLPs that have a public corporate parent that wants to show the world the value of their GP stake (maybe BWP, HEP, TLLP, or some such MLP)


  • Tesoro Logistics (TLLP) announces pricing of $550mm of 6.125% senior notes due 2021

M&A / Growth Projects

  • NGL Energy (NGL) announces acquisition of Oilfield Water Lines LP for 2.46mm common units and $168mm in cash (press release)
  • Rose Rock Midstream (RRMS) announces acquisition of transportation assets from Barcas Field Services for$47mm (press release)
  • Lehigh Gas (LGP) announces acquisition of 34 motor fuel stations in Knoxville, TN region (press release)
  • Kinder Morgan Energy (KMP) and Keyera (KEY) announce 50%/50% joint venture to build a crude oil rail loading facility in Edmonton (press release)
  • New Source Energy (NSLP) announces $3.8mm acquisition (press release)
  • Teekay LNG (TGP) announces it has exercised options with Daewoo Shipbuilding & Marine Engineering Co., Ltd. of South Korea for the construction of two LNG carrier newbuilds for delivery in 2016 (press release)

Distributions Announced

  • Increases:
    • BBEP: $0.48, +1.1%, quarter over quarter
    • VNR: $0.2075, +1.2% over last month


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