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CBRE Global Investors is the investment management division of CBRE Group, Inc. the world’s premier commercial real estate services and investment firm. The company’s shares trade on the New York Stock Exchange under the symbol “CBRE.”
April 25, 2015
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MLPs traded positively for the 6th straight week, with the Alerian MLP Index (AMZ) increasing 1.1%. The AMZ is now 7.8% higher than its most recent low on March 16th. MLPs seemed to be helped by positive MLP earnings releases, by positive production reports from results of producer corporations, and by strength in the broader U.S. equity markets (notably Amazon and Starbucks). MLPs underperformed both the S&P 500 (+1.8%) and utilities (+2.3%) this week.
WTI oil was down slightly in the spot market week over week, but the front month futures price climbed over $57/bbl this week. Natural gas dipped lower, but ethane prices were stable. WTI oil price is now 27.2% higher than its 52-week low reached on March 17th.
MLP earnings have started strong with more end-market focused MLPs NS and EQM. Last quarter started strong as well for MLPs, but tailed off as more of the producer-focused MLPs began reporting. Expectations for gathering & processing names have been written down, but valuations have creeped higher that last few weeks, so it will be interesting to see how the next few weeks plays out.
Streaking
MLPs are on a roll lately, but how historic is a run of 6 straight weeks? As coach Lou Brown said in Major League 2: it’s called a winning streak, and it has happened before.
There have been 13 streaks of at least 6 straight positive weeks since 2000, with the last streak prior to this one ending the first week of June last year. Returns during those streaks have averaged 12.2%, helped by two very large return streaks in 2009. Overall average returns following such a streak are very positive, which may just be a function of most 6 month periods over the last 15 years being positive for AMZ.
The longest ever streak spanned 18 consecutive positive weeks back in 1997. But back then there were only 18 MLPs that combined had less than $10bn in market cap. We have a long way to go before we break records with the current streak, and for now each week has coincided with oil price strength, but MLPs continue to edge higher.
Winners & Losers
Distribution announcements seemed to drive relative performance among MLPs this week. NRP cut its distribution 74%, choosing to maintain some level of distribution and planning to use excess cash flow to reduce leverage. NRP is basically running the same play BWP ran a few years ago. HCLP struggled after fellow frac sand producer EMES reduced guidance and distributions this week.
On the positive side, marine transportation MLPs rebounded, helped by GLOP’s announcement that BG Group is chartering 9 newbuilds. LRE was up on the announcement that it was being acquired by VNR. GLP was up after announcing a distribution increase.
Not pictured below, NSH (+8.9%), NS (+5.1%) and EQM (+6.8%) all performed well this week after releasing results.
Looking at year to date performance, CAPL has dropped into the bottom 5 and LRE climbed into the top 5. NRP took over the bottom spot after its distribution cut.
News of the (MLP) World
MLP follow-on equity has taken a pause for earnings season, but we still have $650mm of MLP paper in the market in the form of two unconventional MLP IPOs. M&A was quiet again this week, but we did get a small E&P MLP consolidation and a drop down. There are reports of assets packages for sale, being bid on in auction processes (like Pioneer’s Eagle Ford midstream assets and BP’s U.S. pipeline assets). At some point those deals and the winners will be announced, but not this week.
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M&A / Growth Projects
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