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March 23, 2014

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Week Thoughts: Fed Chatters, MLPs Wobble

The MLP Index was up, then down this week, to close out almost exactly where it started.  The S&P 500 was up sharply, then down a bit, to close the week up 1.3%.  The equal weight indexes covering the MLP space were down much more than the Alerian MLP Index.  Relative to the equal weight indexes, the Alerian MLP Index was helped by 1.6% performance from EPD this week coming out of its analyst day (EPD is more than 16% of the index). Natural gas, propane and ethane were all down a bit more than 2% for the week.  Ethane sits at the exact same price today as it did a year ago, while oil, propane and natural gas prices are up significantly year over year.

Weekly MLP Review_3-21-14

Below is the chart of how we got to 0.0% return this week for the MLP Index. It appears that parsing Fedspeak overwhelmed the MLP sector in a week that offered little in the way of company-specific news.  Interest rate increase discussion from Fed Chair Yellen sent the US 10-year interest rate higher, and sent MLPs sharply lower on Wednesday.  MLPs traded sideways after that, with typically volatile trading Friday, which was an options expiration and index shuffling day.
Alerian Weekly Chart_3-21-14
Winners & Losers
EROC bounced back this week after dropping more than any MLP last week.  TEP was in second, and is now up 31.6% since 2/10/14.
ENLK continued its volatile trading, going from first last week to worst this week, helped by a $550mm secondary sale, the largest ever equity offering of XTEX/ENLK units.  The offering didn’t increase the overall unit count of ENLK, and cleared out ENLK’s white knight investor from 4 years ago when XTEX’s prospects looked bleak.  High distribution growth MLPs seemed to struggle this week (TEP being a major exception), with PSXP and GEL making rare appearances on the bottom 5 list.  On the other hand, no growth MLP FGP was in the bottom 5 for the second straight week.


For the year to date, TEP takes over the top spot this week, displacing PSXP.  ENLK and TLLP slipped out of the top 5, replaced by WNRL and OILT.  BWP had a strong week of trading, but remains far and away the biggest loser for the year.  Strong weeks from EROC and NRP (3rd and 4th worst last week) dropped EPB into the second to last spot. SPH and APL dropped into the bottom five, replacing EROC and CMLP in the bottom 5.


News of the (MLP) World

It was a very light news week, with just one MLP transaction, and no transactions that changed any fundamentals of any MLPs (ELNK’s offering was not new primary units, DCP Midstream’s announcement was for the GP of DCP Midstream Partners).  All eyes were on EPD’s investor day this Tuesday in Houston, which was very well attended and well received by analysts and investors alike this week, despite not including any big new project announcements.

The dominant conversation throughout the week I spent in Houston at various MLP management team events was around EPD’s insistence that ethane export projects are coming.  Management of MLPs (besides EPD) and petrochemical companies that were asked about ethane exports seemed to be skeptical of the viability of ethane exports given the massive capital that would be required for the conversion of foreign feedslates to ethane, the transportation infrastructure to cross the ocean and to move the product to plants inland in Europe.  Investors seems to be willing to give the benefit of the doubt to EPD, but there is a growing realization that ethane exports won’t be the home run that propane exports have been for EPD.



  • Breitburn Energy (BBEP) files equity distribution agreement to sell up to $200mm of primary common units at-the-market (filing)
  • EnLink Midstream (ENLK) prices public offering of 18.0 units at $30.35/unit, raising $546.2mm in gross proceeds to selling unitholder GSO Crosstex Holdings (press release)
    • Overnight block trade, priced at 5.6% discount to prior closing price
    • ENLK units closed trading up very slightly in the next session

M&A / Growth Projects

  • DCP Midstream, LLC (not the MLP) announces 200 mmcf/d plant construction (press release)
    • Permian Basin sour natural gas processing plant in Lea County, NM
    • Associated gathering system expansion to service producers in both southeast NM and West TX regions of the Permian
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