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July 13, 2013

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Week Thoughts: MLPs Buoyant in Rising Tide

After sinking last week, MLPs (and upstream MLPs in particular) bobbed back this week, up 2.9%.  Stocks were euphoric again (S&P 500 up 3.0%), hitting fresh all-time highs Thursday and Friday, which helped MLPs.  Interest rates were down slightly, and gold bounced back.  Oil hit another 52-week high Wednesday before settling up 2.8% for the week, natural gas was slightly higher and propane was up again in sympathy with oil.

Weekly MLP Review_7-12-13

Not much to report this week.  We started distribution season with the usual suspects raising distributions (EPD, GEL, PAA) at healthy clips.  We had two equity deals this week, another MLP IPO filing and just one M&A deal.  I’m hearing that an IPO will launch early this week, probably Phillips 66 Partners.  Below is the list of pending MLP IPOs, with those that haven’t filed in a year removed.  I believe its just a weird coincidence that we have 2 filed MLPs with OCI in their name, not a ton of thought from a marketing standpoint from either of them, unlike the Marlin Midstream guys with their catchy ticker.
Pending MLP IPOs_7-12
On the M&A front, the combination of rising rates and high multiples paid for recent midstream deals points towards more active M&A in the next few months.  From all accounts, there are many assets out there for sale.  Rates rising generally lowers what MLPs can pay for assets, given that their cost of debt will be higher.  So, we may see M&A pick up going forward.
Winners & Losers
Upstream MLPs clawed back some of their losses from the fireworks show last week.  All 5 of the top 5 this week were upstream MLPs, and all upstream MLPs were positive for the week, although LINE became increasingly volatile late in the week, apparently on more negative articles (which LINE probably can’t really respond to while the inquiry is underway and just before earnings).  NGL and APU were both in the bottom five owing to their equity offerings, although APU sold no primary units in the secondary offering by ETP.  TLLP continues to bounce around, but was down this week.


Upstream MLPs lead the losers (not counting OXF, which continues to maintain the bottom spot).  EVEP made a big move that jumped it from 2nd worst performing MLP year to date to 3rd worst.  On the positive side, EXLP bumped HCLP out of the top five.  There are now 36 MLPs with 30%+ returns YTD, 18 MLPs with 40%+ returns, 13 with 50%+ returns.  Not much else to report on the chart below, all systems go for most MLPs.


News of the (MLP) World



  • Energy Transfer (ETP) prices upsized secondary offering of 7.5mm (up from 6.0mm) AmeriGas (APU) common units at $47.60/unit, raising $357mm in gross proceeds to the selling unitholder (ETP)
    • Priced at $47.60/unit, raising $357mm in gross proceeds to ETP
    • Overnight marketing offering, priced at 4.4% discount to prior close
  • NGL Energy (NGL) prices 9.0mm unit offering at $29.00/unit, raising $261.0mm in equity proceeds ($300.2mm with overallotment option)
    • 9.0mm unit offering raises $261.0mm, 1.35mm units sold in overallotment raises total gross proceeds to $300.2mm
    • One day marketing period, 7.7% file-to-price decline, traded up 2.1% in the session following pricing
  • OCI Resources LP (OCIR) files initial registration statement MLP IPO to raise up to $115mm (SEC Filing)
    • OCIR owns a 51% stake in OCI Wyoming, which is one of the largest producers of soda ash in the world, with the other 49% owned by Natural Resource Partners (NRP)
    • OCI Wyoming had proved and probable reserves of approximately 267.1mm short tons of trona ore, which is equivalent to 145.5mm short tons of soda ash
    • MLP will have incentive distribution rights up to 48%, 50% including 2% G.P.
  • PVR Partners (PVR) files S-3 to sell up to $150mm of equity at-the-market (SEC Filing)


  • KNOT Offshore (KNOP) announces $145.0mm acquisition of Knutsen Shuttle Tankers 13 AS, which owns shuttle tanker Carmen Knutsen
    • KNOP to acquire Knutsen Shuttle Tankers 13 AS, which owns shuttle tanker Carmen Knutsen
    • Acquired from Knutsen NYK Offshore (KNOT), purchase price of $145mm, less $89.1mm of existing bank debt
    • Purchase price to be funded with cash payment of $45.4mm, with seller financing from via a $10.5mm loan from KNOT
    • Carmen Knutsen is a 157,000 deadweight ton shuttle tanker delivered to KNOT in January 2013, operated under 5 year contract with Repsol


  • USA Compression (USAC) announces Bill Manias (most recently CFO of Crestwood Midstream) as new COO, replacing resigning Kevin Bourbonnais
  • Direxion files for MLP ETF
  • Distribution Announcements
    • GEL: $0.51, +2.5% quarter over quarter
    • PAA: $0.5875, +2.2%
    • EPD: $0.68, +1.5%
    • Flat quarter over quarter: PNG ($0.3575), TGP $0.675, TOO ($0.5253)
    • Variable: DMLP ($0.395583)
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