MLPs were flat on average this week on a total return basis, and down slightly on a price basis. MLPs trailed the broader stock market, which was up 2.1% week over week. Interest rates were up small, oil was up big, and natural gas was down big on the latest storage report. NGLs didn’t follow oil higher, and remain at depressed levels relative to oil. Many MLP analysts believe MLPs as a whole are destined for a serious correction. With many an ex-date already passed, this week’s relative weakness could be the beginning of such a correction, especially as the follow-on offering machine starts rolling again in the next few weeks.
The MLP Index still leads the S&P 500, but not by as much as earlier in the year. GPs are running away at this point, up 2.3% this week and up more than 25% on average.
Winners & Losers
EROC was the big loser this week, after dismal earnings. Weak earnings were expected, but the results shocked to the downside, with several impossible to forecast items hitting all at once and taking adjusted EBITDA for the first quarter down to $53.6 vs. consensus EBITDA of $70.2mm. I’ll be out with a research note on them tomorrow to give my updated take. Upstream MLPs dominated the bottom five this week, with LRE, EVEP and BBEP joining the upstream half of EROC in the bottom five. Barclays downgraded TCP this week, which helped land it in the bottom five. On the plus side, refined products MLPs DKL, TLLP and BPL were among the winners. TLLP makes its second straight appearance in the top 5 this week. EXLP was up on good earnings and ARLP was bid up after last week’s earnings and ahead of its ex-date (tomorrow).
The 40%+ YTD total return club now has 9 MLP members. All five of the top five YTD from last week were displaced this week by a new top five, which is extremely rare. EXLP leads all MLPs in performance at 54.7% year to date. EVEP is getting dangerously close to claiming the bottom spot. Other disappointing MLPs this year include OKS and SXE.
That’s all as far as commentary goes for this week. Busy week upcoming with more earnings reports pending. I’ll also be a panelist at the Infocast Utica & Marcellus Infrastructure Development Summit in Pittsburgh late in the week. Find me if you plan to be there as well.
News of the MLP World
Aside from the MLP transactions below, several constituent changes were made to Alerian MLP Indexes (to replace CPNO, which trades no more) that seemed to have varying degrees of impact on the MLPs added: TLLP to the Alerian MLP Infrastructure Index, GMLP to the Alerian MLP Index and Alerian MLP Equal Weighted Index, Crestwood added to the Alerian Natural Gas MLP Index.
Also, a few MLP GPs announced acquisitions this week, including SEMG (RRMS’s GP) buying $300mm of CHK’s midstream assets in the Mississippi (Lou Talarico’s LCT Capital advised SEMG group on the transaction, congrats to him – he’s my office neighbor). RTK (RNF’s GP) also announced the acquisition of a wood chip processor, Fulghum Fibers.
Finally, Barron’s ran another LINE hit piece in this week’s edition. LINE has been range bound for the last few months, oscillating between $36 and $39, and earnings were disappointing, but the allegations in the Barron’s piece were much more serious than just missing numbers. Will be interesting to see if continued financial media onslaughts from Barron’s and Hedgeye will continue to impact LINE’s trading.
Transaction upsized from 10.0mm units originally filed
One day book-build, unit price rose during marketing period by 0.92%
M&A / Growth Projects
Expected to cost $140mm and to be in service by early 2015