Triangles background

September 28, 2014

Viewed 1395 times

Week Thoughts: MLP IPO Line Forms Here

MLPs had a rough week, and it was roughest on small cap MLPs.  The Alerian MLP Index was down 2.1%, while the Alerian MLP Equal Weight Index was down 3.1%.  KMP had a positive week, which helped the cap-weighted MLP Index.  It was the worst week for the MLP Index since the last week of July when the index was down 4.2%, but before that the first week of December was the last time the index was down 2%+ week over week. For the month so far, the MLP Index is down 2.5%, not wholly unexpected following the +8.2% August.  The week did finish on a high note, with the index rising 1.1% Friday.
Weekly MLP Review_9-26-14
MLPs weren’t alone.  The S&P 500, which finished last week just below its latest all-time high (achieved last Thursday), turned sharply negative Monday and Tuesday of this week, and finished down 1.3%.  Utilities followed a similar pattern, down 1.6% for the week.  Commodities bounced back a bit this week.  Oil was up 1.9% and natural gas inched back up to $4.00/mmbtu.
It wasn’t all bad.  It has been since last June since the MLP Index had a 2% down day, and since last may since we’ve had 3 straight 1% decline days.  A few weeks ago, the index was down more than 2% intra-day, but rallied late to avoid it.
This week, after 2 straight 1% decline days, the MLP Index was down more than 1% on Wednesday, but rallied to finish Wednesday up slightly.  Avoiding sharp single day selloffs and sustained selloffs is a good sign for MLP demand.  Dips are more shallow and bought more quickly.
Also, October has historically been a strong month for MLPs, with average returns the last 18 years of 2.4%.  So, there’s always that to look forward to.
IPO Backlog Updated
As outlined in the news section below, there was quite a bit of action in the MLP backlog this week.  As an update, there are now 10 MLP IPOs on file, with at least another 3-5 companies that have publicly announced plans for MLPs (Sempra, Rice Energy and Energy Transfer’s LNG facility come to mind).
IPO backlog_9-26
Winners & Losers
CNNX was far and away the biggest winner, up 34.2% since its debut Thursday.  Beyond that, positive returns were sparse this week.  Coal MLPs had a rough week, with NRP and ARLP making the bottom 5.  HCLP and NMM made the bottom 5 for the second straight week.
Year to date, NRP dropped to second worst in the sector, replacing BWP.  HCLP dropped out of the top 5, replaced by RRMS.
News of the (MLP) World
There was quite a bit of IPO filing action this week, with 4 fresh initial S-1s filed, including 3 on a single day. In addition, we saw another $1.4bn worth of drop-down acquisitions announced, around another $1.0bn of third party M&A and growth projects combined, $709mm worth of follow-on deals, and the greatest MLP IPO pop of all time.  All of the follow-on equity action happened in a very weak tape for MLPs, which goes to show that once MLPs get their name called for a slot in the equity calendar, they are taking it.  To help soak up some of that equity, there was a $1.4bn MLP-focused closed end fund that priced Thursday.

  • CONE Midstream (CNNX) prices IPO of 17.5mm unit at $22.00/unit, raising $385mm in gross proceeds (filing)
    • Yield of 3.86% based on minimum quarterly distribution of $0.85/unit
    • Lowest IPO yield since VLP in December of last year (VLP is tied for lowest ever with PSXP at 3.70%)
    • Debut trading session: opened at $28.50 (+29.5%), and went higher, closing at the high of the day at $30.40 (+38.2%, the biggest IPO pop ever for an MLP)
    • Below is an updated list of the top 10 IPO pops, which shows that 5 of the top 10 of all time have happened in the last 18 months, and 7 of the last 12
    • Recent IPOs have moved 2 other MLPs out of the top 10 that went public in the last 12 months (VLP +21.7% and PBFX +20.4%)

IPO pops_9-26-14

  • Genesis Energy (GEL) prices public offering of 4.0mm units at $50.71/unit, raising $202.8mm in gross proceeds (press release)
    • Overnight offering, priced at 4.4% discount to prior close
    • GEL last issued equity around 12 months ago (9/11/13) at $47.51/unit
  • Martin Midstream (MMLP) prices public offering of 3.0mm units at $36.91/unit, raising $110.7mm in gross proceeds (press release)
    • Overnight offering, priced at 4.2% discount to prior closing price
    • MMLP units traded up 0.9% from pricing in the next trading session
    • Offering was MMLP’s second this year, prior deal priced at $41.51/unit
  • Seadrill Partners (SDLP) prices public offering of 8.0mm units that raised $256mm in gross proceeds (press release)
    • Overnight offering, discount unclear given lack of per unit disclosure on the offering, but units traded down 4.6% on the next trading session following pricing
    • Third equity offering this year following a deal in March and one in June, all done around this price (total equity raised across all 3 offerings: $817mm)
  • GasLog Partners (GLOP) prices public offering of 4.5mm units at $31.00/unit, raising $139.5mm in gross proceeds (press release)
    • Overnight offering, priced at 4.0% discount to prior closing price
  • JP Energy Partners (JPEP) launches $275mm MLP IPO with 6.50% midpoint yield (filing)
    • JPEP is backed by private equity firm ArcLight
    • JPEP has 4 business segments: crude oil pipelines and storage, crude oil supply and logistics, refined products terminals and storage, and NGL distribution and sales
    • JPEP is selling a 37.7% L.P. interest to the public
    • JPEP expects $66.8mm in EBITDA, $56.8mm in distributable cash flow, and 1.2x distribution coverage over the next 12 months
  • PES Logistics Partners (PESL) files initial registration statement for $250mm MLP IPO (filing)
    • PESL owns a 45% interest in a crude oil rail unloading terminal at its sponsor’s Philadelphia refinery complex
    • PESL has a 10-year, fee-based agreement with sponsor
      • Includes minimum volume commitments and inflation escalators
    • Carlyle acquired the Philadelphia refinery complex in 2012 from Sunoco, Inc.
    • PESL will grow through buying the remaining interest in the rail unloading terminal, and through buying additional ROFO assets being developed by PESL’s sponsor
  • Mammoth Energy Partners (TUSK) files initial registration statement for $100mm MLP IPO (filing)
    • TUSK is backed by Wexford Funds and Gulfport Energy Corp (GPOR)
    • Oilfield services MLP that engages with completion and production services (including production and sale of proppant), contract land and directional drilling services, and remote accommodation services
    • Variable distribution MLP with no IDRs
  • Hess Midstream Partners (HESM) files initial registration statement for $250mm MLP IPO (filing)
    • Midstream MLP sponsored by Hess Corp, to operate and develop fee-based midstream assets to serve Hess and other producers
    • Initial assets include a 30% interest in Hess TGP Operations LP (which owns the Tioga Gas Plant in North Dakota), the Mentor Storage Terminal in Minnesota, and a 50% interest in Hess North Dakota Export Logistics Operations LP (which owns rail and truck facilities in the Bakken)
    • HESM will grow by acquiring assets from Hess primarily, but will pursue growth projects and third party acquisitions
  • Exmar Energy Partners (XMLP) files initial registration statement for $125mm MLP IPO (filing)
    • XMLP’s general partner owned by EXMAR NV, a European public company trading on the Brussels exchange
    • XMLP will own and operate floating LNG infrastructure assets under long-term charters
    • XMLP’s initial portfolio of assets will include interests in four LNG regasification vessels (LNGRV) and one LNG carrier
    • XMLP will have projected distributable cash flow over the next 12 months of $28.2mm
  • Atlas Resource (ARP) prices public offering of 3.2mm 8.625% Class D cumulative redeemable perpetual preferred units at $25.00/unit, raising $80mm in gross proceeds (press release)
    • This is ARP’s first preferred unit offering, although affiliate Atlas Pipeline Partners issued $110mm of preferred units earlier this year with a 8.25% coupon

M&A / Growth Projects

  • Susser Petroleum (SUSP) announces drop down acquisition from Energy Transfer (ETP) for $768mm (press release)
    • SUSP to acquire Mid-Atlantic Convenience Stores, LLC from ETP for $768mm, financed with $556mm in cash and 4.0mm new SUSP units issued to ETP
    • Mid-Atlantic Convenience Stores consists of 110 company-operated retail convenience stores and 210 dealer-operated and consignment sites across Virginia, Washington DC, Maryland, Tennessee and Georgia
  • SUSP announces acquisition of Hawaii-based Aloha Petroleum for $240mm
    • Third party acquisition of 6 terminals and 100 Mahalo branded stations
    • Purchase price represents a 7x EBITDA multiple
  • Western Refining Logistics (WNRL) announces $360mm drop down acquisition (press release)
    • WNRL to acquire parent WNR’s southwest wholesale business, which includes:
      • Fuel sales of ~79,000 bbls/d to third party customers and to WNR’s retail and unmanned cardlock locations
      • Rapidly growing crude oil trucking operations in the Permian and San Juan basins
      • A lubricant products distribution business
    • WNR and WNRL will enter into 10-year fuel supply and crude oil trucking agreements containing certain minimum volume commitments by WNR
    • Expected 2015 EBITDA of $40mm, which implies a 9.0x EBITDA multiple
  • Magellan Midstream (MMP) announces open season for 600-mile Niobrara pipeline with up to 400,000 bbls/d of capacity from the Niobrara facilities to Cushing, OK (press release)
    • Another in a string of Niobrara to Cushing crude pipeline announcements the last few weeks from various MLPs (RRMS, NGL, EPD)
    • There will be intense competition for customers and some of these announced potential pipelines won’t get built right away
  • Tallgrass Pony Express Pipeline, LLC announces potential expansion of crude pipeline system to serve Niobrara customers with access to Cushing, OK (press release)
    • Pony Express is 33.3% owned by Tallgrass Energy Partners (TEP), and 66.6% owned by TallGrass Development
    • Speaking of Niobrara crude pipeline competition, here is another one, and given existing Pony Express footprint, this is probably more likely than a straight greenfield pipeline
    • Pony Express Pipeline is expected to be in service in late Q3 2014 and runs from Guernsey, Wyoming to Cushing
  • Atlas Resource (ARP) announces $225mm acquisition of Eagle Ford Shale oil and natural gas properties (press release)
    • ARP to acquire 12 mmboe of net proved reserves with daily production expected in 2015 of 1,900 boe/d (87%, 7% NGLs and 6% natural gas) from 22 producing wells
    • In connection with the acquisition, the upstream development subsidiary of ARP’s parent (ATLS) will acquire 8 wells that have been drilled but not completed and 53 undeveloped drilling locations for ~$115mm
  • ONEOK Partners (OKS) announces $480mm to $680mm worth of additional processing plant projects (press release)
    • OKS will construct (1) a new 80 mmcf/d natural gas processing facility and related infrastructure in northwest Dunn County, North Dakota and (2) a new 100 mmcf/d natural gas processing plant and related infrastructure in Campbell County, Wyoming to serve producers in the
  • EV Energy (EVEP) announces sale of its interest in Cardinal gas Services to E1 and a Korean consortium led by Samchully for $162mm (press release)
  • Dynagas LNG (DLNG) announces LNG carrier acquisition from Dynagas Holdings for $257.5mm (press release)

Other MLP News

  • Susser Petroleum (SUSP) to change its name to Sunoco LP and its ticker symbol to SUN
    • SUN was the old symbol for Sunoco, Inc. that traded on the NYSE for nearly 87 before ETP acquired SUN in 2012
    • This corporate name change will align the name with the name on the gas stations that SUN will eventually own
    • SUSP went public on 9/19/2012, and a little over two years later, the Susser name will longer have a place in the MLP space.  Things are moving pretty fast these days, especially for small MLPs
  • Constellation Energy Partners (CEP) to change its name to Sanchez Production Partners (SPP), effective after the market closes on 10/3 (press release)

Canadian Midstream

  • Enbridge Income Fund (Toronto: ENF) announces acquisition of 50% interest in the US segment of the Alliance Pipeline and cash flow interests in the Southern Lights Pipeline for a combined $1.76bn from Enbridge, Inc. (press release)
    • ENF priced a $337mm bought deal equity issuance to help fund the transaction
    • These assets were not on the list of potential drop down assets to Enbridge Energy Partners (EEP) that was presented at EEP’s analyst day in April
  • Veresen (Toronto: VSN) announces acquisition of 50% preferred interest in Ruby Pipeline from Global Infrastructure Partners for $1.4bn (press release)
    • KMP owns the remaining 50% of the pipeline and will continue to operate the pipeline
    • This pipeline takes natural gas from the Rockies up to Oregon where it can potentially link up with the to-be-built Pacific Gas Connector pipeline to feed into the to-be-contracted and to-be-built LNG export facility at Jordan Cove

o   Williams Partners (WPZ) is VSN’s partner on the Pacific Gas Connector pipeline

No posts matching your criteria