MLP optimism continues to build, as MLPs shrugged off higher interest rates that hurt other yield-oriented securities to gain another 0.5% this week. MLPs are now up more than 8% off the late November bottom. Outside of the changes to the tax backdrop, not much else changed this week. There was some volatility early in the week, with MLPs threatening two straight 1% decline days before a late rally Wednesday and follow through the rest of the week helped MLPs recover.
Mop Up Duty
MLPs are now down 7.0% for the year with just 4 days left. The recent rally has been akin to mop-up time in a basketball game after the outcome is no longer in doubt. Garbage time gains can build confidence for the benchwarmers, a moral victory that can carry over into the next game.
As an avid Rockets fan growing up, garbage time was when Scotty Brooks and Matt Bullard (and later Pete Chilcutt) would come off the bench for the Rockets and hoist as many three pointers as possible. At that point, the crowd at the Summit had typically thinned considerably, but those of us that stayed through garbage time would go nuts when one of those three pointers would fall.
While the MLP business model has been challenged the last few years, MLPs are still out there and are out to prove themselves worthy of investor capital in 2018. Investors lately have been willing to bet they’ll succeed, which at some point becomes a self-fulfilling situation. Capital intensive companies will always have an easier path with a higher stock price.
Merry Christmas to all. Enjoy the last 4 trading days of the year, and here’s to another strong January for MLPs that leads to a happier new year.
Winners & Losers
No news among the bottom 5 or the top 5 this week. Recent strength in shipping MLPs continues with GMLP making the top 5 again this week.
BKEP went from worst to first this week. MMLP gave up some of last week’s gains.
General Partners and Midstream Corporations
Cheniere outshined all others in a strong week overall for midstream corps and GPs, making a fresh YTD high and busting through $50/share on strong volume. AMGP was the outlier on the downside, despite being the clearest winner from a lower corporate tax rate that was confirmed this week.
Cheniere extended its year to date lead to nearly 20% over second place, while NSH is not going to escape the bottom spot for the year without a massive rally.
Canadian Midstream Corporations
Only two of the 8 Canadian midstream corporations were negative this week: Enbridge and Inter Pipeline. The market reacted negatively to Inter’s plan to spend $3.5bn on a chemical plant that will produce cash flow beginning in 2021. Enbridge weakness was likely the result of the credit downgrade from Moody’s.
The top 3 YTD performers remain well ahead of the pack, but Gibson Energy is making a late push to join them.
News of the (MLP) World
No capital markets (as expected) this week. We did get a few FIDs and some progress on some major energy infrastructure projects this week, including additional details and final investment decision for a major natural gas pipeline project involving several large midstreamers, a PDH plant, and progress on Capline reversal. Not bad for pre-Christmas week.
Growth Projects / M&A