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February 15, 2013

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Week Thoughts: No Deals, MLPs Float Higher

MLPs drifted higher throughout the week, with the Alerian MLP Total Return Index making all time highs Wednesday and Thursday, before dropping a bit Friday to close the week up 1.0% over last week.  The S&P 500 traded in a tight band all week, closing up 0.2%.  Not much of anything moved this week, with the exception of gold (down 3.6%, with a 1.7% drop Friday) and natural gas (down 2.9%, but within the bands of usual week over week changes).
Weekly Review_2-15-13
So limited volatility in the markets, and there weren’t any equity or debt deals in the space.  So, basically not much happened this week, aside from several MLPs reporting earnings.
7 MLPs reported 4th quarter earnings this week.

  • BWP – EBITDA reported at $198mm, below consensus expectations of $202mm
    • Lower natural gas storage revenues drove the miss
    • 1.1x coverage a positive
  • TLLP – EBITDA inline with guidance and expectations, market now looking towards the next drop-down for the next positive catalyst
  • CLMT – EBITDA of $91mm slightly below the consensus of $93.5, but that’s based on just 4 analyst expectations according to Bloomberg.
  • GEL – EBITDA beat consensus expectations by 5% driven by strength in pipeline transportation and supply & logistics segments.
    • 1.3x coverage
  • EEP – missed EBITDA expectations
    • Lower natural gas and NGL prices, lower East Texas volumes, higher operating expenses drove the miss
    • Distribution coverage around 0.7x
  • NGLS – EBITDA inline with consensus at $131mm this quarter
    • Distribution coverage of 1.0x
    • Gathering and processing margins were down on low NGL prices, but better performance in the Logistics and Marketing segments as a result of higher fractionation volumes, strength in NGL exports, and godo conditions for the marketing business
  • NGL – beat consensus EBITDA expectations with $73.2mm this quarter vs. $68.3mm consensus.
    • Driven by strength in crude oil logistics segment

Another 9 MLPs report next week:

  • APL
  • ACMP
  • PVR
  • SXL
  • ETP
  • WPZ
  • LINE
  • RGP
  • HEP
  • ARP

Winners & Losers
OXF took its familiar role at the bottom of the pile this week, reaching a fresh low this week, down another 18.3%.  EEP missed earnings and was down week over week.  LNCO and LINE continue to struggle, both down this week,  LINE shot back at short sellers this afternoon.  On the positive side, GLP continues to be red hot, up 5.8% this week.  Upstream MLPs LRE and LGCY both had strong weeks. MLPs with leverage to crude logistics strength, RRMS and HEP did well this week after positive reports from MLPs with similar business lines, like NGL and GEL.


GLP is still on top for the year and appears to be pulling away.  All but 3 MLPs are positive for the year, it would be pretty amazing if that held for the rest of the year.


Variable distribution MLPs are still slightly ahead of the Alerian MLP Index for the year.  I expect GPs, which are lagging as of now, to catch and surpass the MLP Index by the end of the year.  Natural gas is down and oil is up, I also expect that to reverse by the end of the year.


News of the (MLP) World


Very few transactions to speak of this week.  No equity or debt deals this week, and every week that happens means more equity deals later, and I’d expect to see some capital markets activity even on a short week next week.
Growth Projects

  • MarkWest Energy (MWE) announces agreement with Rex Energy Corp to provide gathering, processing, fractionation, and marketing services in the Utica Shale (press release)
  • Energy Transfer (ETP) and Enbridge, Inc. announce 50%/50% joint development agreement to provide crude oil pipeline access to the eastern Gulf Coast refinery market from the Patoka, ILL hub (~700 miles) (press release)
    • Project will involve conversion of natural gas service to crude oil service of certain segments of pipeline that are currently in operation as part of the natural gas system
    • Converted 30-inch crude pipeline expected to be in service by 2015, with a capacity of 420,000 to 660,000 bbls/d

Partnership Actions

  • Energy Transfer Equity (ETE) announces resignation from the board of co-founder and former co-CEO / co-Chairman Ray Davis
    • Davis at last filing owns 7,881,953 ETE units, worth around $368.6mm at today’s prices.  Forbes estimates his total net worth at $1.5bn, including his large stake in the Texas Rangers.
  • USA Compression (USAC) announces addition of Bill Manias to its Board of Directors as an independent director, just a few weeks after he resigned as CFO of Crestwood Midstream (CMLP) (press release)


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