×
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

November 16, 2014

Viewed 716 times

Week Thoughts: MLP Neutrality

MLPs finished the week down 0.6%, saved from a worse print by a 1.3% positive move on Friday.  The equal weight MLP index lagged the cap-weighted version by 80 basis points, continuing the trend discussed here last week.  The MLP index remains 5.7% below its peak at the end of August, but 11.2% higher than its mid-October low.
But again, oil’s slippery slide was the big story.  The U.S. benchmark oil futures price was down another 3.5% this week, with futures closing the week just under $76.00/bbl, around 23% lower than the spot price at the end of 2013.  Natural gas gave back its gains from last week, and dragged ethane down with it, both were down more than 7%.  MLPs held up pretty well given oil’s continued decline, but they are stuck in neutral post-earnings.  The Energy Transfer family of MLPs is holding its highly-anticipated analyst day this week, which may provide some catalysts to get MLPs back in gear.
Weekly MLP Review_11-14
MLPs, Oil and Interest Rates
At the request of a reader, below is a 10 year chart of the MLP Index compared with the price of oil and the interest rate on 10-yr US treasuries.  Not sure there is much to glean from the chart below, particularly given how different the MLP sector is today as compared with even just a few years ago.  Over the long term, MLPs have been fairly consistently higher as interest rates bounced around and oil stagnated after an initial bounce coming out of the financial crisis.
MLPs Crude Interest Rates
Below is a chart that illustrates just how much the sector has changed.  It’s a histogram of the 121 MLPs based on how old they are.  While about 77% of the sector’s market cap is 5+ years old and the cap-weighted average age of all MLPs is 11.4 years, the median age of all MLPs is 3.6 years.  66 MLPs, more than half of the sector, has been public less than 5 years.  Growth rates of those newer MLPs are much higher and with all the drop downs, those newer MLPs will grow much larger in the coming years as the sector continues to evolve.
MLP Age
 
Winners & Losers
QEPM reversed its recent downtrend this week and led all MLPs higher.  QEPM’s strong week was likely a read through from the slightly better deal EPD gave to OILT when the final merger terms were announced this week.  TLLP already announced their intention to take out the remaining units of QEPM at some point following the close of the acquisition of QEPM’s general partner.  If OILT and ACMP got improved deals on their mergers, perhaps QEPM investors will get a reasonable premium when its special committee negotiates its merger.
Speaking of OILT, it made the top 5 this week as well, based on the aforementioned agreement to merger terms with EPD.  TCP also had a strong week on the back of its GTN drop down announcement (see news section below).
On the downside, IPOs GLOP and RIGP, both 2014 IPOs with drop down stories and foreign parent companies, both made the list.  This comes on a week when fellow 2014 IPO Abengoa Yield, a yieldco with a drop down story and a foreign parent company, was down as much as 35.2% this week and closed 17% down week over week.  Questions about that company may have bled over into some of the foreign-backed MLPs.
Top5Bottom5_11-14-14
DM took a break from the top five this week for the first time since its IPO.  RNO made it 4 straight weeks in the bottom 5, down another 11.8%.
Top5Bottom5_11-14-14_chart
Year to date, OILT popped back into the top 5 this week, displacing EQM.  QEPM clawed out of the bottom five, while NKA and RNO sunk deeper.  Both leaders (PSXP and TEP) dropped this week, but maintained their substantial leads over the rest of the sector.
Top5Bottom5_11-14-14_YTD
Top5Bottom5_11-14-14_YTD_chart
News of the (MLP) World
No big M&A and a lot fewer earnings releases made this week feel downright peaceful.
Two more MLP IPOs did file initial registration statements this week (Smart Sand and Azure), bringing the total number of MLP IPOs on file to 13 (see table below for complete list), to go with 17 MLP IPOs so far this year (not counting Landmark Infrastructure, which falls in the non-energy MLP category.  One of those 17 MLP IPOs came this week, and it was not very well received, pricing at a near record yield, but in the wrong direction.
IPO Backlog_11-14
Equity

  • Mid-Con Energy (MCEP) priced public offering of 5.8mm units at $17.27/unit, raising $100.2mm in gross proceeds (press release)
    • Overnight offering, priced at 4.0% discount to prior close, and closed down 4.8% from pricing in the next session
  • Plains GP Holdings (PAGP) priced secondary offering of 60.0mm units at $25.00/unit, raising $1.5bn in gross proceeds for selling unitholder (press release)
    • Selling unitholder is a subsidiary of Occidental (NYSE: OXY)
    • 3 day marketed offering, with file-to-price decline of 7.4%
    • PAGP traded up 11.3% in the next session following pricing
    • Offering upsized from 55.0mm units
  • EnLink Midstream (ENLK) priced public offering of 10.5mm common units at $28.37/unit, raising $297.9mm in gross proceeds (press release)
    • Overnight offering, priced at 3.6% discount to prior close
  • Cheniere Energy Partners LP Holdings, LLC (CQH) priced public offering of 10.1mm shares at $23.25/share, raising $234.8mm in gross proceeds (press release)
    • Overnight offering, priced at 2.8% discount to prior close
  • Navios Maritime Midstream Partners (NAP) priced IPO of 8.1mm units at $15.00/unit (11.00% yield), raising $121.5mm in gross proceeds (filing)
    • NAP is a spinoff from Navios Maritime Acquisition (NYSE: NNA) that will own and operate crude oil tankers under long-term charter agreements
    • Priced well below the initial filing range
    • 0% yield was the worst for a non-variable distribution MLP in more than 2 years (since HCLP’s IPO in August 2014)
    • NAP opened at $13.20 and closed at $13.45, down 10.0% in its first session
  • Azure Midstream (AZUR) filed initial registration statement for MLP IPO to raise up to $175mm (filing)
    • AZUR will operate natural gas gathering and processing assets in North Louisiana and East Texas under long-term, fixed fee contracts with producers
    • Backed by PE-firms Energy Spectrum and Tenaska Capital Management
    • AZUR expects to have $37.0mm of EBITDA in 2015
  • Smart Sand Partners (SSLP) filed initial registration statement for MLP IPO to raise up to $100mm (filing)
    • SSLP produces Northern White frac sand from its sand mine and processing facility near Oakdale, Wisconsin
    • SSLP has contracted 96% of its production capacity under fixed price contracts with weighted average remaining contract life of 2.7 years
    • Has full IDRs up to 50% tier

Debt

  • Sunoco Logistics (SXL) priced $1.0bn worth of senior notes (press release)
    • $200mm of 4.25% senior notes due 2024 sold at 101.772% of par
    • $800mm of 5.35% senior notes due 2045 sold at 99.331% of par

M&A / Growth Projects

  • Enterprise Products (EPD) and Oiltanking Partners (OILT) announce merger agreement (press release)
    • OILT unitholders will receive 1.3 EPD units for each OILT unit
    • Ratio implies a 5.6% premium to OILT unitholders based on 9/30 stock prices, one day prior to announcement of the merger, and a 10.4% premium to OILT unitholders based on 11/10 price
  • White Cliffs Pipeline, LLC (owned by RRMS, PAA, WES and Noble Energy, Inc.) announced plans to expand capacity on the pipeline from 150,000 bbls/d to 215,000 bbls/d by adding horsepower, modifying pumps and adding stations (press release)
  • TC PipeLines (TCP) announced plans to acquire remaining 30% interest in GTN from parent TransCanada (press release)
    • Gas Transmission Northwest LLC (GTN) is a 1,353 mile pipeline that transports natural gas under long-term contracts from the Westrn Canada Sedimentary Basin and the Rocky Mountains to Oregon and California
    • TRP highlighted that it expects to drop down $1bn of worth of assets to TCP annually going forward

Hamm History

  • Harold Hamm’s divorce settlement was announced to be approximately $1.0bn (Forbes)
    • Hamm is worth around $14bn today, but before he became King of the Bakken (and the SCOOP), he was the chairman of an MLP that almost 10 years ago priced one of the smallest MLP IPOs ever ($45mm) Hiland Partners
    • A short 19 months later, Hiland Holdings GP, LP (HPGP) priced its IPO. HPGP owned L.P. and G.P. Interests (and IDRs) in Hiland Partners (see deal gift pictured below)
    • It was (and for now, it still is) the quickest GP IPO post MLP IPO
    • In June 2009, Hiland Partners and HPGP announced that it would be taken private by Harold Hamm, Hiland at $7.75/unit and HPGP at $2.45/unit
    • Speculation is that at some point Hamm’s midstream business might go public again someday, and it may even continue to be called Hiland

HPGP

RELATED CONTENT
No posts matching your criteria
MLPguy Post
Week Thoughts: Market Relief, MLP Grief The market found some relief on the stimulus bill, but midstream and MLPs lagged this week. Canada midstream helped the AMNA outperform the other midstream indexes. Oil prices fell further, and the lack of places to put oil in this climate is concerning.
MLPguy Post
Midstream Week Thoughts: Remote Detonation While the entire country worked remotely this week, the market had its worst week since 2008. This led to another week of staggering losses in midstream and oil prices. MLPs actually outperformed utilities and the DJIA this week and were roughly inline with the S&P 500 decline.
MLPguy Post
MIDSTREAM ELEPHANTS COMING HOME TO ROOST The balance between supply and demand of MLP paper has always been delicate. In the past it was a balance between perpetually growing inflows and equity issuance. There were times when equity offerings temporarily overwhelmed investor appetite for MLPs. But as liquidity has diminished in recent years, the structural risks to this group to a stampede to the exits grew larger.
MLPguy Post
Week Thoughts: Market Suspended, MLPs Canceled What a week. The oil price collapse dragged MLPs and midstream stocks down again this week. The group finished down a staggering 30%, which leaves YTD returns in less than 3 months at negative 40-50%.
MLPguy Post
Week Thoughts: From Russia, No Love for Midstream Midstream captured more downside, selling off again this week but for a different reason. Last week, midstream was down alongside the rest of the stock market. This week the market finished flat, utilities finished sharply higher with a big interest rate drop, but midstream sold off again.
MLPguy Post
Midstream Week Thoughts: Selling Goes Viral Midstream joined in on the biggest and broadest equity selloff in recent memory this week. This was the worst week for the S&P 500 and for MLPs since 2008. Oil dropped to the mid-$40s, interest rates and natural gas prices dropped to fresh lows.
MLPguy Post
Week Thoughts: MLP Erosion Resumes Stocks of all types were negative this short week (even utilities, barely), so despite a rally in commodity prices and a further drop in interest rates, midstream stocks were negative. MLPs were down for a 4th week in the last 5 weeks and were again the worst performing group in midstream.
MLPguy Post
Week Thoughts: Midstream Positive, Beyond Partnerships (BP) On the back of rebounding oil prices and an ever-higher stock market, midstream indexes were positive this week. In a familiar refrain, the broader AMNA index was well ahead of the MLP Index, reflecting better performance among corporations
MLPguy Post
Week Thoughts: Midstream Reprieve MLPs and midstream companies arrested their recent decline this week with a flattish week. The broad equity market had a strong week, helped by gains from some big tech firms on earnings results.
MLPguy Post
Week Thoughts: Somber Midstream, Market Mentality Midstream was negative this week, along with most other global equities and commodities.  Midstream outperformed broader energy stocks, but underperformed the S&P 500 and utilities, which continue to grind higher. 
MLPguy Post
Week Thoughts: Market Seeks Shelter, Not MLPs MLPs and midstream came back to earth this week, dragged down by oil and natural gas prices that were too weak to be ignored by midstream investors after 6 weeks of gains.
MLPguy Post
Week Thoughts: Midstream Phase Won Midstream gains kept rolling for a sixth straight week, again riding a strong broad equity market higher, and defying weakness in upstream energy stocks (XOP -3.6%).
MLPguy Post
Week Thoughts: Falling Tension, Rising Tide Lifts Midstream MLPs extended their winning streak to 5 weeks, but MLPs and midstream stocks were weaker towards the end of the week as oil prices and energy stock prices sank lower.
MLPguy Post
INFRASTRUCTURE DELIVERS MLPs have bounced 10%+ off the early December 2019 multi-year low and are enjoying a seasonal respite from fund outflows. Without the stress of daily extreme volatility and angst, now is an ideal time to re-evaluate midstream exposure and consider (or re-consider) listed infrastructure.
MLPguy Post
Week Thoughts: Clean Slate Midstream traded up for a 4th straight week since bottoming on December 3rd.  MLPs are up 12.7% from the bottom and the AMNA isn’t far behind with a 10% gain.
MLPguy Post
2019 Year-End Midstream Statistics The year ended this week, which you may have heard.  From this point forward, we forever will be closer to 2050 than 1990.  So, it is time to review the final results of 2019.
MLPguy Post
Week Thoughts: No Holiday Drama for Midstream Midstream traded up the first 3 days this week to cap a run of 7 positive days out of 8.  Then on a very low volume session Friday, midstream corporations and MLPs sold off a bit to finish the week slightly positive overall.  Midstream broadly was in-line with the broad stock market overall (S&P 500 +0.6%).
MLPguy Post
Week Thoughts: Pipelines Piping, MLPs A-Leaping Midstream’s bounce off the bottom continued this week. In basically a repeat of last week, the MLP Index gained 4.6% the first three days of the week and was flattish from Wednesday’s close through the end of the week.
MLPguy Post
Week Thoughts: Midstream Relieves Itself Midstream and MLPs ripped this week, continuing the rebound that began in the middle of last week. A benign broad market backdrop allowed midstream stocks and MLPs to rally on their own merits this week.
MLPguy Post
Week Thoughts: Midstream Trypophobia Midstream stocks took cues from the broad market this week, drifting lower early in the week before mounting a comeback later in the week, including a big Friday after the robust jobs report.
MLPguy Post
DECADENCE TO DECAY: A DECADE OF MLPguy As of this week, I have now been publishing thoughts on MLPs at MLPguy.com for more than 10 years. The usual end of the year reflection in the media and among investors will be magnified arbitrarily this year by the end of the decade.
MLPguy Post
Midstream Week Thoughts: Groundhog Day for Thanksgiving Monday was positive for midstream, capping a rare 3-day run of positive performance. But apathy reigned the rest of the week, as Midstream and MLPs traded down the rest of the holiday-shortened week.
MLPguy Post
Week Thoughts: Midstream Flattish, Finishes on Positive Note Midstream was almost positive week over week, but had to settle for two days of positive performance in a row.
MLPguy Post
Week Thoughts: Mariner Makes Midstream Mixed Midstream stocks were mixed across categories, with Canadian midstream outperformance offset by MLP weakness, but overall finished positive for the week, helped by broad market strength and income stock strength.