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July 31, 2011

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Week Thoughts: Paralysis by Politics

MLPs, along with the rest of the market, were held hostage by what Jon Stewart calls Armadebtdon 2011.  At this point, still no resolution on the debt ceiling and no word on what the yet to be agreed upon deal will include in terms of tax changes, including potential MLP taxation (although that’s still very unlikely).  In the absence of a resolution to the debt ceiling issue, the market voted with its wallets as to what it thinks of the politics in Washington, with the S&P 500 down 3.9% on the week.  MLPs fell inline with that, but slightly less at down 3.1%.  Counter-intuitively, 10-year treasury rate declined this week, as treasuries are a safe haven even with a pending default or at least a downgrade.

For the month of July, MLPs were down 2.6%, after a rebound in June.  MLPs underperformed the S&P500 in July after significantly outperforming in June.  MLPs remain 7.2% below their YTD high of 390 on April 28th, and are now slightly negative on the year (not including distributions).

Outside of the (lack of) news in Washington, it was a busy week for earnings and distributions announcements.  The most interesting news items this week came from Chesapeake’s earnings call, when CEO Aubrey McClendon shared some information about how successful their early wells in the Utica Shale had been (see here).  $EVEP, which has significant acreage in the Utica shale, was up 9.4% this week on the news.
The biggest loser this week was $SPH, which has for the last few years been the best propane MLP to own.  It was down 12.2% this week on weak propane fundamentals and weak earnings.
28 more MLPs and 2 more GPs announced distributions for the second quarter this week.  Thus far, 58 MLPs that I follow have announced distributions, with 37 (64%) announcing quarter over quarter increases, 20 holding them flat, and 1 lowering distributions.  Median distribution growth is 1.3% quarter over quarter.   Out of the 7 pure-play general partner holding companies, all 7 have raised their distribution quarter over quarter, with ATLS on the high end at 100% increase, and NSH on the low end at 3.1% increase.  See below for this week’s announcements.

  • $QRE kept distribution flat quarter over quarter
  • $EEP raised distribution 3.6%
  • $PVR raised distribution 2.1%
  • $BBEP raised distribution 1.2%
  • $LGCY raised distribution 1.9%
  • $APL raised distribution 17.5%
  • $ATLS raised distribution 100%
  • $NS raised distribution 1.9%
  • $NSH raised distribution 3.1%
  • $NKA kept distribution flat
  • $ARLP raised distribution 3.7%
  • $AHGP raised distribution 5.0%
  • $ENP lowered distribution 6.0%
  • $EROC raised distribution 25.0%
  • $VNR raised distribution 0.9%
  • $MMLP kept distribution flat
  • $LINE raised distribution 4.5%
  • $SXL raised distribution 1.7%
  • $DPM raised distribution 1.2%
  • $CHKM raised distribution 3.6%
  • $CLMT raised distribution 4.2%
  • $WPZ raised distribution 2.1%
  • $NRGY kept distribution flat
  • $NMM raised distribution 2.3%
  • $RNO kept distribution flat
  • $APU kept distribution flat
  • $ETP kept distribution flat
  • $RGNC raised distribution 1.1%
  • $OKS raised distribution 1.7%
  • $EXLP raised distribution 1.0%

 
Disclosure: The information in this article is not meant to be financial advice, we are not your financial advisor and I am posting my comments for informational purposes only. 

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