In a short week, MLPs gave up last week’s gains with a 4.5% decline overall. The active oil contract shows up as flat week over week, but given the May contract that took over on Tuesday was actually down 4%, and dipped below $40/bbl after closing above $40 on Tuesday for the first time in 2016. MLPs have produced 28.9% off the lows even after this week, and remain on pace for the first positive month since October 2015.
After no equity issuance since November, we got 2 MLP offerings this week. The SHLX deal was upsized and traded well, which was encouraging. We still haven’t seen a more distressed MLP issue equity in a public deal since September 2015. Also, a week can’t go by without more drama from ETE and WMB, and it looks like the suspense will continue through May (see below for details).
The U.S. dollar reversed some recent weakness to push oil lower. The weekly inventory report was mixed, with a draw at Cushing, strong product demand signals, and lower oil production offset by a large import number that resulted in a big week over week inventory build, fairly isolated to the Gulf Coast. Oil’s decline reversed a bit on Friday following the rig count numbers that showed a 15 rig decline overall.
Easter Break Down
There aren’t many non-animated movies centered around Easter. But two movies do seem somewhat relevant if you think about the MLP sector as the Easter Bunny. The first is Mallrats, the low budget Kevin Smith film from 1995. In that movie, Jay and Silent Bob (dressed in all black, personifying oil) attack the mall’s costumed bunny in front of a horrified group of children.
The other bunny-related movie scene that comes to mind is from A Christmas Story, when Ralphie gets a pink bunny suit from his Aunt Clara and is forced to model it for the family. He obliges, but with a miserable look on his face that probably resembles some frustrated MLP investors this week.
While children delight this weekend as they skip around backyards across the country hunting for dyed eggs, investors continue their hunt for sustainable oil price traction that will eventually lead to stability in the MLP sector. Also, like some recent M&A in the midstream sector, finding the most eggs wins you little more than pride and a basket full of inedible eggs that get thrown away. Happy Easter and NCAA basketball to all.
Winners & Losers
New this week, the charts in this section will focus on relevant MLPs, or those with a market cap above $250mm. CPPL led all MLPs after trailing most MLPs last week on the TransCanada acquisition announcement. Small cap refiner-sponsored MLPs WNRL and PBFX made the top 5. On the downside, PAA continues to trade in tandem with oil prices. The updated S-4 from Energy Transfer hurt WPZ’s stock price. AM dropped on the secondary sale from its sponsor on Friday. TOO gave up some of its massive gains from last week.
CEQP traded up slightly this week, but remains at the bottom of the sector. WPZ and ENLK are the biggest MLPs in the bottom 5. Each of the top 5 year-to-date declined this week, with the exception of APU, which was slightly better than flat.
General Partner Holding Companies
General partners outperformed MLPs on average again this week, but no single GP managed to gain 2% this week. ETE and WMB volatility continued, taking the bottom 2 spots after taking the top 2 spots last week.
News of the (MLP) World
Equity offerings and fresh ETE/WMB drama were the focus this week. Expect at least one equity deal this week now that the ice is broken, but it will probably be more of the same low-risk bought deals from premium MLPs.