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September 22, 2013

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Week Thoughts: Fed Speaks, MLPs Say "How High?"

MLPs beat other stocks this week, a welcome change from recent weeks.  The Alerian MLP Total Return Index was up 2.3%, but is still 3.6% below its May 22 all-time high.  The S&P 500 made a fresh all time high on Wednesday, but retreated in the back half of the week to settle up 1.3%.  Stocks were up and interest rates dropped on news that the Fed’s expected tapering will be on hold (i.e. bond purchases will continue).  So, yield is back en vogue (for now), but the Fed decision was reportedly close, and certain Fed voting members are still chirping in the media about tapering happening sooner rather than later.  The liquidity flow will eventually stop, and yields on treasury notes will rise, and MLPs may feel some blow back when that happens.  But for at least two days this week, we all got to enjoy the sweet relief that the gravy train has not yet left the station…

Weekly MLP Review_9-20-13

The MLP Index was sharply lower to start the week, and needed back-to-back >2% days to finish the week up 2.3%. MLPs held up considerably better than the broader stock market (represented below by the S&P 500) on Friday, when it seems the Fed-phoria started to wear off.
Weekly AMZ
MLPs were probably helped by a slower week for equity offerings than we saw last week.  Perhaps weakness early in the week made issuers gun shy.  There were two overnight deals that priced Friday, a day not typically very active for follow-ons, which indicates that price was a factor and the issuers launched their deals only after MLPs had bounced back considerably in the middle of the week.  Expect to see more MLP equity issued in the next week, and when that happens, we’ll get to test the mettle of this now two-week-old MLP rally…
Winners & Losers
Random mix of MLPs in the top 5 this week, led by HCLP at 8.1%.  EPD’s 5.8% spike was definitely the largest market cap increase of the week.  The upstream MLPs on either end of the return spectrum below (LINE and ARP) both saw the bulk of their price movements occur in the last 30 minutes of the trading day Friday, which seems to happen often on option expiration days each month.

Top5Bottom5MLPs_9-20_13

Year to Date
MLP year to date winners and losers still in their slots, still many more winners than losers…

Top5Bottom5MLPs_9-20_13_YTD

News of the (MLP) World

News-of-the-World

Equity

  • Cheniere Energy Partners (CQP) files initial S-1 for up to $690mm IPO of Cheniere Energy Partners LP Holdings, LLC (CQH), which will own L.P. units of CQP and will be treated as a corporation for federal income tax purposes (filing)
    • Another LNCO-style offering to help CQP finance its LNG buildout
  • Valero Energy Partners (VLP) files initial S-1 for up to $345mm MLP IPO that will own refined products pipeline and terminal assets (filing)
  • Navios Maritime (NMM) prices public offering of 5.0mm common units at $14.26/unit, raising $71.3mm in gross proceeds
  • NGL Energy (NGL) prices public offering of 4.1mm units at $32.68/unit, raising $132.8mm in gross proceeds

Debt

  • Spectra Energy Partners (SEP) prices $1.9bn  in aggregate principal amount senior notes, including:
    • $500mm of 2.95% senior notes due 2018 at 99.829% of par
    • $1.0bn of 4.75% senior notes due 2024 at 99.765% of par
    • $400mm of 5.95% senior notes due 2043 at 99.875% of par

M&A / Growth Projects

  • Enterprise Products (EPD) and Plains All American (PAA) announce agreement for $120mm expansion of their Eagle Ford JV crude oil pipeline (press release)
  • Summit Midstream (SMLP) announces natural gas purchase agreement with Aux Sable Midstream for up to 25 mmcf/d of natural gas gathered on SMLP’s Bison gathering system

Other

  • Magellan Midstream (MMP) announces that CFO John Chandler will resign his position, effective 3/31/14, replacement search underway
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