×
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

August 15, 2015

Viewed 740 times

Week Thoughts: MLP Sponsors Answer the Call

With 2Q MLP earnings season finally in the books, and with all the negative MLP-specific news priced in for another 90 days, MLPs traded much better this week, even with another leg down in oil prices to fresh lows.  The Alerian MLP Index (AMZ) increased 5.2% including distributions.  Volatility continued, as daily action alternated between positive and negative each day this week.  Large cap MLPs outperformed smaller MLPs (equal-weight Alerian up only 4.2%), a positive indicator of fund flows into the sector.  In a reversal of last week, MLPs outperformed other equities by a wide margin, including U.S. stocks (S&P 500 +0.7%) and utilities (+2.1%).
Weekly MLP Review_8-14-15
MLPs appeared oversold last week, and were due for some relief.  Oil sentiment continues to weigh on the MLP sector, but if oil prices show signs of life in the coming weeks, MLPs should trade higher, given there will be limited equity issuance and oil price sentiment seems to have been the main driver of the recent MLP draw down.
PIPEs, like we saw this week with OKS, are positive for the sector (even if they are done at steep discounts and result in significant dilution) because they reduce the sector’s equity absorption needs (i.e. overhang).  The $750mm bought by sponsor OKE and Kayne Anderson is $750mm the ATM and public capital markets don’t have to take down in the zero sum capital environment.
Investors short the MLP sector heading into earnings now have fewer catalysts ahead (beyond oil prices, which can be shorted more directly elsewhere), which may lead to technical tailwinds from short covering in the short-term.
Several sponsors stepped in to aid their struggling MLPs this week (OKS, AMID, HMLP, KNOP), and the market reaction was positive in most cases.  Further evidence of sponsor commitment to MLP financing vehicles with out of whack prices should come through as other sponsors take note.
All-in-all, after clawing back around half of last week’s decline in value in a down oil price week, sentiment is clearly improved from last week (could not have gotten much worse) and the sector seems better positioned to sustain a rally in the near-term.  Having said that, after several head fakes over the last year, caution is still warranted with oil prices at 6 year lows.
Winners & Losers
AMID was the runaway winner after announcing a dropdown acquisition at an attractive multiple and guiding to 5% annual distribution growth.  PTXP and USDP both rallied after announcing earnings. The bottom five was again dominated by Upstream MLPs (E&P and Coal) while SXE quarterly earnings did not impress the market in a positive way.
Top5Bottom5_8-14-15
Back to back 30% declining weeks is not typical, but it happened to NSLP, which now trades under $0.60/unit.
Top5Bottom5_8-14-15_chart
For YTD, VLP jumped into the top 5 replacing MMLP while the rest of the top and bottom names are unchanged with some shifts in the order.  After another poor showing this week, NSLP is now down more than 90% YTD.
Top5Bottom5_8-14-15_ytd
Top5Bottom5_8-14-15_ytd_chart
General Partner Holding Companies
All but three GPs generated positive returns this week after all were negative last week.  ATLS jumped 23% after reporting earnings this week and PAGP clawed back some losses from last week’s debacle.  ETE and WMB performed strongly on no news (perhaps positive merger vibes) while OKE rounded out the top 5 despite falling late in the week after the OKS deal.  There weren’t any clear trends or drivers of performance among the bottom 5.
Top5Bottom5GPs_8-14-15
Top5Bottom5GPs_8-14-15_ytd
News of the (MLP) World
News-of-the-World
Equity

  • ONEOK Partners (OKS) announced private placement of 24.8mm units at $30.17/unit for total gross proceeds of $750mm (press release)
    • OKS sponsor ONEOK, Inc. (OKE) acquired 21.5mm units for $650mm
    • Kayne Anderson acquired 3.3mm units for $100mm
    • OKE will also contribute $15.3mm to maintain its 2% G.P. interest
    • OKE will now own 41.2% of OKS, up from 36.8% prior to the offering
    • Price represented 8.3% discount to prior closing price
    • OKS units closed flat from the prior trading session (and well above the purchase price), outperforming the MLP Index the next trading session, on the removal of equity overhang, it appears
  • Sunoco Logistics (SXL) filed S-3 to register up to $1.0bn of common units (filing)
    • SXL issued $242mm on its ATM in 2Q, and has issued $384mm so far on its ATM through the first 2 quarters of 2015 ($947.8mm total equity issued in 2015 including overnight issuance, 2nd most of all MLPs after PAA)
  • Enterprise Products (EPD) filed equity distribution agreement to raise up to $1.9bn worth of common units at-the-market (filing)
    • 19 banks are party to the agreement
    • EPD issued $359.3mm on its ATM in 2Q15, and $767.1mm through the first 2 quarters of 2015

M&A / Growth Projects

  • MarkWest Energy (MWE) announced development of new dry gas gathering system, supported by long-term, fee-based contract with Ascent Resources (press release)
    • System will be designed to gather more than 2 bcf/d of gas and initial operations are expected to begin by the end of 2015
    • Total investment developing gathering assets in the region could exceed more than $1bn over the next 3 years
  • American Midstream (AMID) and sponsor ArcLight Capital announced $162mm drop-down acquisition and future drop down plans (press release)
    • Arclight agreed to sell 25% of its 51.7% interest in Delta House, which owns oil and gas infrastructure assets in the deepwater Gulf of Mexico
    • Purchase price represents 5x next 12 months EBITDA
    • AMID also announced intention to resume 5% annual distribution growth following the close of the acquisition
    • AMID also highlighted $1bn of drop-down acquisitions through 2017 that will support distribution growth
  • Variable distribution fertilizer MLPs CVR Partners (UAN) and Rentech Nitrogen (RNF) announced merger valued at $839mm (press release)
    • For each unit, RNF unitholders will receive 1.04 units of UAN and $2.57/unit of cash
    • RNF will retain ownership of RNF’s Pasadena facility
    • Price implies 14.1% premium to RNF’s 30-day average price through 8/7
  • Kinder Morgan (KMI) announced acquisition of four new 50,000 deadweight ton product tankers for $568mm (press release)
    • Each tanker (currently under construction) will have 337,000 barrels of capacity and will be delivered between November 2016 and November 2017
    • The tankers will be placed in U.S. domestic service under the Jones Act
  • Hoegh LNG Partners (HMLP) announced drop down acquisition of Hoegh Gallant for $370mm (press release)
    • The Gallant is a floating storage & regasification unit (FSRU) operating under a charter that extends through 2020, but HMLP’s sponsor has agreed to backstop the agreement at 90% of its current rate through 2025
    • HMLP also announced intent to increase distributions 22% from current levels with its 4Q distribution post-closing of this acquisition

Other

  • KNOT Offshore (KNOP) announced authorization of 1.0mm unit buyback program (press release)
    • KNOP authorized to purchase 666,667 common units, KNOP’s G.P. authorized to purchase 333,333 common units
    • 0mm units equates to around $15mm, and will reduce KNOP’s already thin float
RELATED CONTENT
No posts matching your criteria
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.
MLPguy Post
Week Thoughts: Midstream Captures More Downside The slow bleed in midstream continued this week. MLPs again lagged broader the Midstream Index (AMNA), because of Canadian midstream and a few large U.S. corporations. Higher commodity prices and strong broader equity market trading weren’t enough to get midstream moving higher...
MLPguy Post
Week Thoughts: Midstream Earnings Hit, Stocks Miss Midstream and MLPs were slight underperformers among energy stocks (XOP and XLE were largely flat) and underperformed general equities (as measured by S&P 500), which rallied 1.5%. Earnings, ex-dates for distributions and month-end strangeness whipped things around a bit in between a basically flat week.
MLPguy Post
Week Thoughts: MLPs Less Travelled Midstream basically kept pace with the broader market this week, while MLPs underperformed, again. Oil prices and broader equities were supportive, but that wasn’t enough to get MLPs moving ahead of EPD results Monday to kick off the meat of 3Q reporting season.
MLPguy Post
Week Thoughts: Midstream Inaction Quiet week in the stock market this week, which translated into a quiet week for midstream as well. The AMNA finished basically unchanged, while the MLP Index was slightly lower.
MLPguy Post
Week Thoughts: MLPs Brace for Earnings Midstream was negative across the board this week, and the MLP Index lost more ground to the other midstream indexes that include corporations. Lower oil prices, higher interest rates and general aversion to energy stocks were likely reasons for continued weakness for the sector.
MLPguy Post
Week Thoughts: Macro Noise Offsets MLP News After 5 straight negative days last week, midstream had three positive days this week, including an intra-day reversal Thursday and a positive Friday.
MLPguy Post
Status Update: Midstream Green in September Given the end of the month and quarter fell on a Monday, I wanted to get a quick post out with updated month and quarter end numbers. I hope you’ll understand if the upcoming weekly post is a bit shorter as a result.
MLPguy Post
Week Thoughts: MLPs Selloff On Purpose Risk was definitively off this week across energy stocks, commodities and the broader stock market. Naturally, utilities and REITs caught a bid, and midstream did not. Within midstream, Canada held up well and helped AMNA outperform the AMZ and AMUS.
MLPguy Post
Week Thoughts: Midstream Stocks Sustain September Surge Midstream stocks traded up amid a strong backdrop for energy stocks and for income stocks...
MLPguy Post
Week Thoughts: Scarcity Value Rally in MLPs Midstream stocks outpaced the S&P 500 and utilities this week in the face of falling oil prices and rising interest rates. MLPs were the best performers within midstream, benefitting from the “value rally”...
MLPguy Post
Week Thoughts: Market Advances, Midstream Unmoved It was a short, but steady week for midstream, helped by strong Canadian midstream performance that more than offset weakness from MLPs. Midstream stocks underperformed utilities and the S&P 500...
MLPguy Post
Week Thoughts: Takeout Bid Stops Midstream Bleeding Midstream broke out of its 6-week slump this week, helped by a private equity bid lobbed in Tuesday night, but also helped by risk-on broad market action and rebounding commodity prices.
MLPguy Post
Week Thoughts: Midstream Checked, Market Unbalanced Midstream stocks declined for a 6th straight week, this time joined by a pretty scary broad stock market decline on Friday. Broad market fear appears to be joining the energy sector antipathy and midstream apathy we’ve seen all summer.
MLPguy Post
Five Years Since Midstream Peak: Universe Update and In Memoriam The end of next week, the last trading day of August, will be the 5-year anniversary of the peak of the Alerian MLP Index.
MLPguy Post
Week Thoughts: Yield Inversion, Midstream Aversion Midstream stocks were down inline with broad equities this week, after a rally Friday that almost salvaged the week. It was a 4th straight negative week for midstream, and the MLP Index (on a price basis) now sits 11.3% lower than its high for the quarter reached in mid-July.
MLPguy Post
Week Thoughts: Un-Navigable Midstream Midstream and MLP stock performance accelerated to the downside this week, finishing with bigger losses this week than last week. It was also the 4th consecutive negative week for midstream, the longest such streak since late December.
MLPguy Post
Week Thoughts: Midstream De-Rated It was an inauspicious start to August for the stock market, for oil prices, and for the midstream sector due to the overriding influence of interest rates and tariff rates this week. MLPs had their second worst week of the year and worst week since early February.
MLPguy Post
Week Thoughts: Midstream Flagging into Earnings Barrage Midstream started the week strong Monday, but the bounce back was short-lived as midstream sold off each of the remaining days of the week, even as oil prices stabilized and the broad market rallied. Canada and a few larger corporations dragged down broader midstream indexes relative to the MLP Index, which continues to hold up well in a backdrop of upstream carnage.