MLPs traded positively for the 4th straight week, with the Alerian MLP Index (AMZ) increasing 1.8%. The AMZ is now 5.4% higher than its most recent low on March 16th, and has produced total returns of 6.3% since its 52-week low reached on January 13th. But the index remains 16.4% lower than its peak in August. MLPs were helped by higher commodity prices and limited equity issuance again this week, and MLPs seem to be gaining some traction heading into 1Q 2015 earnings season. MLPs outperformed the S&P 500 (+1.7%) slightly and outperformed utilities (+0.3%) by a wide margin this week.
I’m writing this on “moving day” at the Masters. If stock market performance were a golf tournament, MLPs would be in the middle of the pack vs. other sectors, down 3.1% year to date. MLPs are way ahead of natural gas and utilities, but behind oil prices and way behind REITs and &P 500. The last 4 weeks of positive returns have kept MLPs in contention vs. stocks, but they need to put up some big numbers to move up the leader board.
Oil prices in the spot market finished 5.1% higher than last week, making it 4 straight positive weeks. Oil is now 18.8% higher than its 52-week low reached on March 17th. Oil prices rallied early in the week before falling sharply Wednesday after the latest oil inventory report was released by the EIA that showed U.S. oil in storage rose by 10.9mm barrels to a record level of 482.4mm barrels.
Natural gas price closed at a 52-week low in the U.S. spot market, down 1.6% on the week. Storage levels for natural gas are 10.5% below the 5 year average for this time of the year, but 79% higher than this time last year. So, the natural gas situation is considerably less dire than oil, but not great. The oil rig decline will have a supply impact on natural gas production, given that natural gas production has been supported by associated gas. On the demand side, a cold winter wasn’t enough this year. First LNG is approaching for Cheniere and there will be growth from coal plant retirements at some point, but the market has lost patience.
Winners & Losers
Commodity prices lifted most MLPs this week. Outside of QEPM, there was no company-specific news that flowed through to the top or bottom 5. Falling natural gas prices probably didn’t help FELP and CNNX.
VTTI seemed to be down just because it was up last week, and vice versa for RIGP. Not much follow through.
CCLP had another very good week, maybe helped by management being on the road for a non-deal roadshow following their recent analyst day. No other changes among the top and bottom 5, although CNNX is now the second worst performing MLP of all, remaining in the doghouse following their revised distribution outlook earlier this year.
News of the (MLP) World
News this week was business as usual: equity offerings, acquisition of midstream assets from distressed producer, and a clean-up merger. Distribution announcements began this week, Kinder releases earnings this week, MLPs kick off the week after. Business as usual.
M&A / Growth Projects