×
Triangles background
OUR COMPANY AND AFFILIATES
CBRE GLOBAL INVESTORS

CBRE Global Investors, combined with CBRE Clarion Securities and CBRE Caledon, is one of the world’s leading real asset investment managers providing real estate and infrastructure investment solutions to over 500 clients worldwide.

INVESTMENT MANAGEMENT

CBRE Global Investors

CBRE Clarion Securities

CBRE Caledon Capital Management

Trammell Crow Company

MLPguy
CBRE GROUP

CBRE Global Investors is the investment management division of CBRE Group, Inc. the world’s premier commercial real estate services and investment firm.  The company’s shares trade on the New York Stock Exchange under the symbol “CBRE.”

REAL ESTATE SERVICES

CBRE

CBRE Blueprint
Our Company and Affiliates

This website uses cookies to improve the user experience. By using our website you consent in accordance with our Cookie Policy. Read More

ACCEPT
Triangles background
Back to Insights

June 19, 2016

Viewed 2168 times

Week Thoughts: MLPs Outperform as Votes Loom

MLPs found themselves caught up in global risk off action early in the week as fears over Brexit spread across Europe, pushing the dollar higher and oil prices lower.  After dipping below 300 briefly in the morning Tuesday, the MLP Index recovered, trading up the last 3 days of the week, defying falling oil prices Wednesday and Thursday, and digesting the largest week of equity issuance all year.
Weekly_6-17-16
Oil prices were looking for a reason to correct, and the combination of higher dollar on Brexit fears and higher rig count provided a good catalyst (unrelated to still improving supply and demand dynamics).  Oil peaked above $51/bbl before falling for six straight days for a ~10% overall decline.  Oil finally bounced Friday and closed the week down just 2%.  Natural gas prices rallied through the macro noise and a bearish oil inventory report to close the week above $2.60/mmbtu.
Also of note, the quarterly rebalance for Alerian’s MLP Indexes occurred Friday, which probably contributed to some of the unusual trading volume numbers across the space.
Rock the Vote
The pending Brexit vote will have the market’s focus this week, but another pending vote will have the MLP world captivated: the WMB shareholder vote.  ISS recommended that shareholders vote for the deal, and most shareholders probably will.  The court dates set for Monday and Tuesday this week in Delaware may determine whether the vote is necessary or relevant.
The ETE/WMB saga has been dragging on almost as long as Donald Trump’s presidential campaign, both of which have reached the year mark over the last week.  Whatever we learn or don’t learn this week, hopefully some resolution is near.  I won’t speculate on the outcome or what outcome is currently priced in.  Instead, I’m going to enjoy Father’s Day, and I suggest you do the same.
Poll Recap – MLP 2.0 Adoption
Last week, I asked you readers how widely you thought MLPs would adopt a more sustainable MLP financial model going forward.  I cynically implied that when capital was no longer scarce, MLPs would revert back to the old ways.
The winning answer to the poll was all of the above, in other words that high distribution coverage, low leverage and IDR reductions would all be widely adopted across the MLP sector.  The results surprised me a bit, and seems to indicate the market is more idealistic (or naïve) than I thought.
Poll Results
Winners & Losers
It was a mixed bag of winners this week, although ENLK and AM both traded well on positive read-throughs from their producer-sponsors’ M&A activities.  FGP rebounded a bit from last week’s carnage.
Top5Bottom5_6-17-16
On the downside, TGP made the bottom 5 despite a 10.7% pop on Friday.
Top5Bottom5_6-17-16_chart
NGL took over the top spot with a 90% total return so far this year.  Not many other changes among the winners and losers for the year.  The MLP Index is up nearly 11% year to date, way ahead of the S&P 500.
Top5Bottom5_6-17-16_YTD
Top5Bottom5_6-17-16_YTD_chart
General Partner Holding Companies
GPs overall traded roughly inline with the MLP Index this year.  WGP’s secondary offering weighed on WGP and for some reason the other high growth premium GPs like TEGP and EQGP.  SEMG did equity as well this week, but traded up after pricing, as it seems like oil price changes are the overriding factor in the daily price movements for SEMG.
Top5Bottom5GPs_6-17-16
On the positive side, there seems to be some hope of a positive outcome for WMB from next week’s court dates that helped WMB recover some of its losses from last week.
Top5Bottom5GPs_6-17-16_chart
News of the (MLP) World
We got further evidence of an improving equity capital market.  Three equity offerings priced this week, and the two primary offerings traded well in the aftermarket.  Also, Mexican natural gas demand manifested itself in two large scale pipeline projects announced this week to serve Mexico.  We’ve seen many more $1bn+ projects canceled and delayed than announced in the midstream sector, so these announcements are encouraging.
Financing

  • Western Gas Equity (WGP) priced public offering of 12.5mm units at $38.48/unit, raising $481mm in sales proceeds (press release)
    • Secondary sale, all proceeds going to sponsor Anadarko
    • Overnight block trade, priced at 8% discount to prior closing price, traded down 3.6% from pricing to finish the next trading session down 11.1% overall
    • Anadarko retains more than 67% interest in WGP
  • Hi-Crush Partners (HCLP) priced public offering of 4.5mm units at $10.80/unit, raising $48.6mm in gross proceeds (press release)
    • Priced at 9.4% discount to prior closing price
    • Offering upsized from original 3.0mm unit offering
  • Semgroup Corp (SEMG) priced public offering of 7.5mm shares at $27.00/unit, raising $202.5mm in gross proceeds (press release)
    • Upsized from original 5.0mm offering, priced at 7% discount to prior closing price
    • Traded well, catching Friday’s oil price rally and finishing up 10.6% from pricing in the next session
  • Teekay Offshore (TOO) announced $200mm equity issuance through two private placements (press release)
    • TOO to issue $100mm of 10.5% Series D Cumulative Exchangeable Perpetual Preferred Units, with 4.5mm warrants with a $4.55/unit exercise price and 2.25mm warrants with $6.05/unit price
    • TOO to issue $100mm worth of common units at $4.55/unit
    • Each private placement was made to a “group of investors”
    • The entire Teekay complex rallied hard Friday (TOO +12.3%, TK +10.1%, TGP +9.2%)

M&A / Growth

  • TransCanada Corp (TRP) and IEnova (publicly-traded Mexican subsidiary of Sempra Energy) announced that its joint venture was chosen to develop and operate a $2.1bn natural gas pipeline in Mexico (press release)
    • The pipeline will be backed by 25-year contract for 2.6 bcf/d of natural gas transportation with the Comision Federal de Electricidad (CFE), Mexico’s state-owned power company
    • Pipeline expected to be in-service by 2018
    • The JV will be 60% owned by TRP and 40% owned by IEnova
  • Spectra Energy (SE) announced that it was awarded a 168-mile, $1.5bn intrastate natural gas pipeline project to connect U.S. supply to a newly developed natural gas pipeline in Mexico (press release)
  • Natural Resource Partners (NRP) announced sale of non-operated oil & gas working interest assets in the Williston Basin for $116.1mm (press release)
    • The sale represents NRP’s exit from the non-operated oil and gas working interest business

Other

  • WMB proxy re-iterates that the original estimate of more than $2bn of synergies should not be relied upon and the updated and actual number is much lower (filing)
    • WMB also announced $0.10/share dividend payable if the merger vote happens and the merger closes (filing)
    • Updated presentation regarding the merger also posted filed by WMB (filing)
RELATED CONTENT
No posts matching your criteria
MLPguy Post
Week Thoughts: Midstream Furious Finish Midstream had another huge week on still more follow-through of positive sentiment shift that’s occurred over the last 5 weeks as positive vaccine news sparked a rotation into value and energy stocks.
MLPguy Post
Midstream Movember: Updated Returns Through Month End Because the end of the month fell on a Monday, we felt it might be useful to post a wrap up on monthly performance for midstream, outside of the normal weekly cycle.
MLPguy Post
Week Thoughts: Midstream Parade Goes On Energy stocks (midstream included) continued their recent run of positive stock performance in this short week, helped by ongoing positive vaccine data points. It was the best Thanksgiving week return for midstream since 2008 (when MLPs were up 20%).
MLPguy Post
Week Thoughts: Midstream Hosts Another Large Gathering Another vaccine update, another rally for energy stocks and midstream stocks. Midstream was green all week until taking a breather Friday. Stocks and the infrastructure index were slightly negative, and utilities were hit hard.
MLPguy Post
Week Thoughts: Midstream Goes Green on Vaccine Energy stocks were buoyed by the big vaccine news Monday, and the gains held for the week overall. XOP spiked 20.4% this week, XLE was up 17.1%. Midstream wasn’t quite that strong but posted with historically significant gains Monday and for the week
MLPguy Post
Week Thoughts: Stocks Get Mandate, Midstream Flips Red The market (and midstream for most of the week) seemed to shrug off the ongoing presidential election malaise this week.
MLPguy Post
Week Thoughts: Pain Distributed Across Markets, Midstream Midstream and MLPs returned to earth this week, following lower oil prices and the market lower. Solid earnings reports from some of the larger names weren’t enough to offset macro headwinds and ET’s large distribution cut.
MLPguy Post
Week Thoughts: MLPs Ramp into Earnings MLPs resumed their October rebound this week with their best week since early August. Energy stocks outside of midstream also had a strong week on the back of merger mania in upstream with another E&P merger announced this week and others rumored.
MLPguy Post
Week Thoughts: Midstream Flattens Friday Midstream and MLPs looked to be coasting to a third straight week of solid gains, but a sharp selloff across energy stocks Friday erased the gains for the week.
MLPguy Post
Week Thoughts: Midstream Unchained, MLP Eruption MLPs followed up last week’s modest bounce with a huge week in a risk-on surge for equity markets, commodity markets and everything else this week.
MLPguy Post
Week Thoughts: Midstream Asymptomatic as Oil Declines The stock market broke its losing streak, and MLPs and U.S. midstream came along for the ride this week, bouncing slightly after a rough week, month, quarter and year. Weakness in Canadian midstream dragged down the AMNA Index.
MLPguy Post
Week Thoughts: Midstream Canceled Again The S&P 500 closed negative for a 4th straight week, while midstream had its worst week since June in what has been a brutal September so far.
MLPguy Post
Week Thoughts: Midstream Yield High, Interest Low Midstream stocks bounced back early in the week after two rough weeks, but then as the market rolled over later in the week, midstream and MLPs were dragged back down.
MLPguy Post
Week Thoughts: Another Setback Setback for Midstream Midstream struggled again this week, in a risk-off week for stocks and commodity prices.
MLPguy Post
Week Thoughts: Midstream, The Final Season With the market taking a very well-publicized breather this week, midstream followed the market and oil prices lower. MLPs were down each day this week and finished down 4.7%.
MLPguy Post
Week Thoughts: Stocks Up, Midstream Down MLPs staged a comeback effort late in the week (+3.7% Wednesday to Friday), but finished down vs. last week, and well below the S&P 500’s 3.3% gain.
MLPguy Post
Week Thoughts: Midstream Militia Retreats After a few weeks of positive performance, midstream rolled over this week. Energy stocks in general were negative, despite benign commodity price movements and strength among market indexes (which clearly are dominated by tech stocks).
MLPguy Post
Week Thoughts: Blue Flame Special for Midstream Midstream followed up last week’s big week with another strong week of price action. Midstream’s gains were mostly isolated to Monday and Wednesday, but those two days were good enough for a 3% week for the group overall, better than the S&P 500, utilities and infrastructure.
MLPguy Post
Week Thoughts: Midstream Restraint Rewarded Midstream was higher each of the first 4 days this week, before taking a breather Friday, to finish up 5-6% over last week. MLPs were particularly strong, especially gathering & processing stocks....
MLPguy Post
Week Thoughts: Midstream Still Waiting for Its Kodak Moment Midstream underperformed this week, even after counting the juicy dividends that were paid this week. Tech stocks, utilities and other sectors reported strong earnings and saw stock price gains as a result.
MLPguy Post
Week Thoughts: KMI Anthem Over, Play Ball! Midstream performance was mixed this week, with strength in MLPs offset by weakness among large U.S. corporations like WMB and KMI, the latter of which reported less than stellar 2Q results coupled with low energy commentary.
MLPguy Post
Week Thoughts: Positive Pipeline Performance Pre-Earnings Midstream bounced back this week, riding a strong market, stable oil prices and the ramp into distribution season.
MLPguy Post
Week Thoughts: Dakota Access Denied Midstream struggled in an otherwise strong week for the market, hurt by a court decision that rocked the Bakken while not offering much confidence for any midstream company seeking to develop energy infrastructure going forward.
MLPguy Post
Week Thoughts: Market Party, MLPs Stay Home Stocks of all kinds were positive in this pre-holiday week, except for MLPs. Midstream overall lagged the broad market, despite oil and natural gas price gains.