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January 21, 2012

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Week Thoughts: How Low Can Nat Gas Go?

The answer to the above question is: I don’t know.  Nobody does, although safe to say it won’t go negative…  The more interesting question is: how long before it recovers? And is that time period measured in months, quarters, years or decades?  I’m betting years at this point, and I’m not alone…
In the meantime, low natural gas prices are not a major concern for many MLPs, particularly midstream MLPs focused on liquids-rich plays.  There are high hopes for the major NGL players heading into earnings.  One such player, $OKS, announced on Thursday announced a 9% increase in its fourth quarter distributable cash flow guidance, after increasing that guidance on November 1st by 15% (press release).  Another MLP leveraged to natural gas liquids margins is $NGLS, which priced a $150 million overnight equity offering this week.    Of the 4 marketed equity offerings this week and of the 7 total equity offerings so far in 2012, NGLS was the only one to close higher that it priced on the next trading day.  NGLS finished up 2.5% from its issue price after pricing the deal on Wednesday morning.  Expect some very strong earnings from OKS, NGLS, EPD and others with leverage to NGL prices.

This week, the MLP Index tracked the S&P 500 very closely, and both finished the week up 2.0%.  Amidst the low volume stock market melt up, the 10-year treasury rate popped up above 2% for the first time in a few weeks.

That’s it for me this weekend.  Only so many hours in a day, and I spent several of those today outside shovelling and playing in the snow with my kids.  And tomorrow, my wife and 2 oldest kids (both still under 5) will be braving the elements in the upper levels of Foxboro’s Gilette Stadium (expected temperature at game time: 32 degrees) to watch the AFC Championship.  We’ve never been to a Patriots game, but given that we are moving to Austin in a few months (more on that later), I guess this is our last chance, and it may be Brady-ichik’s last chance as well.

(Patriots Coach Bill Belichick with the rare public smile while receiving his honorary Doctorate degree from BU on the day I graduated in 2004)

Distribution Announcements
26 MLPs have announced distributions so far this quarter, 15 (58%) have increased distributions, 11 have maintained distributions.  This week:

  • $KMP, $SPH, $CQP, $GSJK, $GLP, $NRP, $TOO, $TGP announced flat distribution
  • $TLLP raised distribution 7.4%
  • $WES raised distribution 4.8%
  • $XTEX raised distribution 3.2%
  • $APU raised distribution 3.0%
  • $OKS raised distribution 2.6%
  • $EPB raised distribution 2.6%
  • $CMLP raised distribution 2.1%
  • $VNR raised distribution 1.7%
  • $TLP raised distribution 1.6%
  • $EPD raised distribution 1.2%
  • $LGCY raised distribution 0.9%
  • $EVEP raised distribution 0.1%

Also, in case you missed these posts from this week, check them out.

Disclosure: The information in this article is not meant to be financial advice, we are not your financial advisor and I am posting my comments for informational purposes only.  Long EPD and NGLS.

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