×
Triangles background
OUR COMPANY AND AFFILIATES
CBRE GLOBAL INVESTORS

CBRE Global Investors, combined with CBRE Clarion Securities and CBRE Caledon, is one of the world’s leading real asset investment managers providing real estate and infrastructure investment solutions to over 500 clients worldwide.

INVESTMENT MANAGEMENT

CBRE Global Investors

CBRE Clarion Securities

CBRE Caledon Capital Management

Trammell Crow Company

MLPguy
CBRE GROUP

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.”

REAL ESTATE SERVICES

CBRE

CBRE Blueprint
Our Company and Affiliates

This website uses cookies to improve the user experience. By using our website you consent in accordance with our Cookie Policy. Read More

ACCEPT
Triangles background
Back to Insights

October 20, 2012

Viewed 963 times

Week Thoughts: IRS, PLRs, MLPs, IPOs (and other Acronyms)

Rather than break it up this week, I’m just going to do one big monster post.  Not that you care, but the reason is that I’m leaving Sunday night for another conference in Vegas, this one the OPIS Supply Conference.  It should be great timing and a chance to talk about refinery MLPs, logistics MLPs from corporations that own refineries (MPLX), and refined products distribution MLPs (like Lehigh Gas).
So, MLPs were down slightly for the week.  The S&P 500 was up for the week, despite being down 1.7% on Friday (24 points), the biggest single day drop for the index since June 21st, on weak earnings, and on investors rebelling against an overload of Black Friday talk on its 25th anniversary.  The Alerian MLP Index was down just 1.2% Friday.   Interest rates rose a bit, gold and oil were down, while natural gas scraped out a gain.  The only real winner was ethane this week, up 8.4%.

We’ve got two more new MLPs coming next week, which would make it 9 for the year, after we saw our 7th MLP IPO of the year.  Also, earnings season kicks into full swing.  Will be interested to hear what all the MLPs are seeing in terms of drilling activity in their areas, as well as an update on the ethane oversupply situation in the mid-continent.  KMP / EPB had good earnings this week, which is always a good sign.

News of the (MLP) World
The IRS has really staffed up it appears, as they have now issued 16 private letter rulings (PLRs) this year, up from a record 7 PLRs last year.  This week the PLR ruled that Ethylene crackers produce MLP-qualifying income (read Fitch’s comments via Bloomberg on the subject).
Williams was likely the one seeking the ruling so that it could drop its Geismer asset into WPZ.  But it paves the way for a new spate of pure play petrochemical spin-off MLPs, which would be fun, because the MLP IPO market was getting a little boring with all the frac sand, refinery and offshore drilling MLPs we’ve been getting lately…
For whatever reason, now is the time ask the IRS about your potentially MLP-able assets.  The situation evokes images of the Godfather and the parade of callers he had on his daughter’s wedding day.  Tom Hagen says: “Its part of the wedding, no Sicilian can ever refuse a request on his daughter’s wedding day.”  I don’t know what they’ve put in the coffee over at the cubicle that produces the PLRs, but its working.

Actually, its almost suspicious, like the IRS is trying to encourage dis-incorporation to usher in the demise of Section 7704, the MLP tax break…just kidding (obviously).
Equity

  • Copano Energy, LLC (CPNO) priced public offering of 6.0mm common units at $32.13/unit, raising $192.8mm in gross proceeds
    • Priced at 3.69% discount to prior close, priced into a rough market Friday, so aftermarket performance was weak.
  • Seadrill Partners, LLC (SDLP) priced IPO of 8.75mm common units at $22.00/unit, raising $192.5mm in gross proceeds
    • Priced at the top of the IPO price range of ($20.00 to $22.00), opened at $24.00 and closed its first trading day at $24.37, up 10.8% from its IPO price
    • First ever offshore drilling MLP, pretty compelling way to bet on the capex budgets of 4 super major oil producers
  • MPLX (MPLX) launched IPO with midpoint IPO yield of 5.25% (see below) (watch roadshow here)
    • CEO Gary Heminger on the roadshow said investors have wanted them to do an MLP for a long time, but he timed it just right to get potentially the lowest MLP IPO yield of all time.  Lowest so far is SEP in 2007 at 5.45% (not counting the GPs, AHGP was lowest ever at 2.75%, ok so I guess I am counting)
    • Really clean balance sheet also helps, basically no debt
  • Lehigh Gas (LGP) launched IPO with 8.75% midpoint IPO yield (see below) (watch roadshow here)
    • One of the few self-made MLPs we’ve seen in the last decade or so since PE firms and public companies started to dominate the MLP game
    • Wholesale distributor, owns convenience stores, from which it receives rental income (MLP qualifying)
    • 120k retail gas stations in the country, this is a rollup play, you’ve got to bet that they will be able to make acquisitions despite considerable debt at IPO
  • Mid-Con Energy (MCEP) priced public offering of 4.0mm (3.0mm secondary, 1.0mm primary) units at $21.20/unit, raising $21.2mm in gross proceeds and $63.6mm gross to selling unitholders (Yorktown)
    • 1 day bookbuild, file-to-price decline of 4.93%, up 0.9% from pricing the next day
  • MWE filed S-3 for $1.0bn in debt and equity securities

M&A / Growth Projects

  • Boardwalk Pipeline (BWP) announces acquisition of the remaining 65% interest in PL Midstream LLC from an affiliate of its GP Loews Corp for $269mm
    • Original purchase closed October 1, the speed of this remaining drop came faster than most expected, but so did that equity offering a few weeks back
  • Mid-Con Energy (MCEP) announces two acquisitions of oil properties in Oklahoma for a combined $24.1mm
    • Combined net production: 258 boe/day
    • Net proved reserves: 1.8 mmboe (64% PDP), 99% Oil, 19 year reserve life

Quarterly Per Unit Distribution Announcements
There were some very large distribution increase announcements this week, like TLLP’s 11% increase, which wasn’t too surprising.  NGL raised distributions quarter over quarter 9.1% though, after a 13.8% distribution bump last quarter, for a total of 24.1% growth in 2 quarters.  Despite that growth, NGL is only up 8.5% since July 24th, the day prior to its last distribution increase.
I was surprised by the EPB distribution bump, given that Kinder has conditioned us to expect 9% annual growth for EPB, not 5%+ a quarter.  He’s had some practice in the whole under-promising and over-delivering thing.

  • TLLP:    $0.455, +11.0% quarter over quarter
  • NGL:      $0.45, +9.1 qoq
  • EPB:       $0.55, +5.5% qoq
  • CLMT:    $0.62, +5.1% qoq
  • OILT:      $0.375, +4.2% qoq
  • GSJK:     $0.375, +2.6% qoq
  • KMP:     $1.26, +2.4% qoq
  • MCEP:   $0.485, +2.1% qoq
  • CMLP:   $0.51, +2.0% qoq
  • LRE:        $0.4775, +0.5% qoq
  • TLP:        $0.64, flat
  • NRP:      $0.55, flat
  • NMM:   $0.4425, flat
  • VNR:      $0.20 (monthly), flat
  • HCLP:    $0.2375 (pro-rated MQD), flat

 
Winners & Losers
SDLP is the big winner for the week, and only needed one trading day to do it.  OXF had an unusually strong week on the upside (maybe investors liked what Romney had to say on coal at the debates, but doubtful that had much impact), while ACMP finally took a pause and had an uncharacteristic decline week over week.
On the downside, MCEP and CPNO had equity deals this week that dropped them, NGLS pre-announced weak earnings and lowered expectations around guidance going forward, which helped drop it 3.4%.

As predicted last week (or at least as hinted at last week), OXF has climbed out of the cellar, a spot it has occupied seemingly forever.  But now BPL takes over at the bottom of the MLP pile on a year to date basis.  CLMT rallied back from its 12% beatdown last week on the back of a 4% distribution increased, and it has reclaimed its top spot.  None of the 10 names in the bottom and top 5 changed, just the order, a few more down days like today and we may see some more action in the YTD winners and losers.

Leap Frog
The charts below highlight the back and forth MLPs and broader stock have had over different time periods so far this year.  The S&P 500 won the first quarter and is winning for the year, but looking back just 6 months or 1 months and MLPs have S&P 500 beat.  But looking back 3 months, and the S&P500 is beating the Alerian.  Time periods are arbitrary, but I thought it was worth passing along to you this interesting game of leapfrog playing out with the indexes…

 

 

 

RELATED CONTENT
No posts matching your criteria
MLPguy Post
Week Thoughts: Midstream Canceled Again The S&P 500 closed negative for a 4th straight week, while midstream had its worst week since June in what has been a brutal September so far.
MLPguy Post
Week Thoughts: Midstream Yield High, Interest Low Midstream stocks bounced back early in the week after two rough weeks, but then as the market rolled over later in the week, midstream and MLPs were dragged back down.
MLPguy Post
Week Thoughts: Another Setback Setback for Midstream Midstream struggled again this week, in a risk-off week for stocks and commodity prices.
MLPguy Post
Week Thoughts: Midstream, The Final Season With the market taking a very well-publicized breather this week, midstream followed the market and oil prices lower. MLPs were down each day this week and finished down 4.7%.
MLPguy Post
Week Thoughts: Stocks Up, Midstream Down MLPs staged a comeback effort late in the week (+3.7% Wednesday to Friday), but finished down vs. last week, and well below the S&P 500’s 3.3% gain.
MLPguy Post
Week Thoughts: Midstream Militia Retreats After a few weeks of positive performance, midstream rolled over this week. Energy stocks in general were negative, despite benign commodity price movements and strength among market indexes (which clearly are dominated by tech stocks).
MLPguy Post
Week Thoughts: Blue Flame Special for Midstream Midstream followed up last week’s big week with another strong week of price action. Midstream’s gains were mostly isolated to Monday and Wednesday, but those two days were good enough for a 3% week for the group overall, better than the S&P 500, utilities and infrastructure.
MLPguy Post
Week Thoughts: Midstream Restraint Rewarded Midstream was higher each of the first 4 days this week, before taking a breather Friday, to finish up 5-6% over last week. MLPs were particularly strong, especially gathering & processing stocks....
MLPguy Post
Week Thoughts: Midstream Still Waiting for Its Kodak Moment Midstream underperformed this week, even after counting the juicy dividends that were paid this week. Tech stocks, utilities and other sectors reported strong earnings and saw stock price gains as a result.
MLPguy Post
Week Thoughts: KMI Anthem Over, Play Ball! Midstream performance was mixed this week, with strength in MLPs offset by weakness among large U.S. corporations like WMB and KMI, the latter of which reported less than stellar 2Q results coupled with low energy commentary.
MLPguy Post
Week Thoughts: Positive Pipeline Performance Pre-Earnings Midstream bounced back this week, riding a strong market, stable oil prices and the ramp into distribution season.
MLPguy Post
Week Thoughts: Dakota Access Denied Midstream struggled in an otherwise strong week for the market, hurt by a court decision that rocked the Bakken while not offering much confidence for any midstream company seeking to develop energy infrastructure going forward.
MLPguy Post
Week Thoughts: Market Party, MLPs Stay Home Stocks of all kinds were positive in this pre-holiday week, except for MLPs. Midstream overall lagged the broad market, despite oil and natural gas price gains.
MLPguy Post
Week Thoughts: Midstream Dusted After a solid start to the week, midstream stocks collapsed over the last four days this week, including big declines Tuesday and Friday.
MLPguy Post
Week Thoughts: Midstream Bounce Faded It was an up and down week for midstream, but overall positive vs. last week, helped by a huge day Monday. The Supreme Court ruling in favor of pipeline development across the Appalachian Trail seemed to help midstream stocks broadly on Monday.
MLPguy Post
Week Thoughts: Midstream Paper Jam After an all-time good week across the sector last week, Midstream stocks gave it all back this week. Most of the damage came on Thursday, when the broad equity market dropped 6%.
MLPguy Post
INFRASTRUCTURE: ANOTHER MIDSTREAM EXIT OPPORTUNITY Midstream stocks and MLPs have bounced 100%+ off the latest multi-year low in late March, and they are enjoying a rare respite from fund outflows, despite fundamental challenges. Without the stress of daily extreme volatility and negative stock performance, now is an ideal time to re-evaluate midstream exposure and consider (or re-consider) listed infrastructure.
MLPguy Post
Week Thoughts: Midstream Breaks Out with No Brakes Midstream stocks had an all-time great week of stock performance, with double-digit returns across all three indexes, driven by a double-digit gain in oil prices and another surge in the broad stock market.
MLPguy Post
Week Thoughts: MLPs Lose Week, Win May It was a short week with not much news, so midstream and MLPs followed the broad equity market higher. The melt-up of the broader equity market continued, supported by stimulus and optimism that permeated the markets for most of the week as areas of the country opened back up.
MLPguy Post
Week Thoughts: Midstream Refreshed After Pause After pausing last week, the bounce back for midstream resumed in a big way this week. MLPs and the AMUS put up their biggest week of the year on the back of another big week of oil price gains and strength in the broader stock market.
MLPguy Post
Guest Q and A with ETF Expert on AMLP Guest Q&A with an expert on ETF structuring where we focus discussion on the most popular ETF in the midstream sector, AMLP.
MLPguy Post
Week Thoughts: Midstream Remains Resilient (Recently) The streak is over, midstream stocks traded down for the first time in 7 weeks. But positive sentiment for energy stocks due to higher oil prices helped MLPs (and to a lesser extent broader midstream stocks) outperform utilities and the S&P 500 slightly this week.
MLPguy Post
Week Thoughts: Midstream Stocks Up on Lower Guidance Midstream rallied for a 6th straight week, but this week was different than the prior 5. This week’s rally was led by larger, more integrated players in the U.S. and Canada, not by gathering & processing MLPs. This week was less about bottom fishing or short covering. Broad equity market strength and a 25% oil price gain helped.
MLPguy Post
Week Thoughts: Midstream Gains Again Midstream and MLPs ran their streak of positive weeks to 5, this time trading up with oil prices even as the broader equity market and utilities were negative. Late in the week, the market threw a couple of pails of cold water on the risk-on euphoria, sending midstream and MLPs lower Thursday and Friday.