March 26, 2017
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MLPs finished the week negative overall, but showed relative strength against the broad market and energy stocks (but not against utilities). Oil prices drifted lower on an unwind of long oil bets, driven by concerns U.S. production growth is too much, raising uncertainty about the next OPEC meeting, even though its 2 months away. Without much MLP-specific news, we again find ourselves living week-to-week with oil prices, waiting until the next inventory report or OPEC meeting.
There is just one more week left in March and the index is down 3.4% for the month so far. That’s a big hole to dig out of to keep the positive monthly return streak alive (currently at four months), but MLPs have had three weeks bigger than 3.5% since the election in November, so it remains a possibility. If things go the other way and MLPs decline 1.8%+ this week, they would break their current streak of four straight positive quarters.
Poll Question: Coming Soon
My wife and I have three children under 10, and we don’t trust anyone to watch them. Part of it is bad experiences with babysitters, but most of it is we are control freaks. Between the kids and this blog each weekend, I don’t get out much. I go to the movies, but mostly in daylight hours just to be the popcorn sherpa at Animated Movie Dujour. So, I don’t catch too many made-for-adults movies in the theaters these days.
This weekend, however, Star Wars Rogue One became available to stream at home, and I finally got to watch it. I knew it was coming, I heard some things about it, but I had to wait for a long time before actually seeing it. Sometimes the hype in this situation can overwhelm the experience of actually watching it, but not this time.
In the MLP sector, we seem to be in a similar waiting period. We are waiting for the following, non-exhaustive list of “catalysts”:
The hype embedded in the anticipation of the above announcements varies, and all of the above should be resolved in the next few months, hopefully rescuing MLP sentiment before oil prices cause too much more damage.
Sorry, there are no polls available at the moment.
Winners & Losers
Low liquidity midstream MLPs (DKL, CQP and NBLX) led the way this week, with DKL making the jump from bottom to top 5. SPH made it two straight top 5 weeks, perhaps saved by the late March heating degree day push that has also helped natural gas prices.
In the bottom 5, no news among the losers, but CELP did repeat near the bottom of the MLP sector with another 8% decline.
YTD Leaderboard
The number of 20%+ YTD return MLPs went from 5 last week down to 3 this week, led by NBLX with nearly double the return of the next best return. On the downside, we went from one 20%+ YTD return MLP last week to 3 this week. 3 of the biggest losers for the week are among the biggest losers YTD (CELP, SXCP, USDP). MLP are hanging onto a small 1.8% gain overall, but the disparity of returns is broad, illustrative of uncertainty driving indecisiveness among investors.
General Partners and Midstream Corporations
Median GP & Midstream corporation returns of -1.4% underperformed MLPs this week. Just four of the group were positive. TEGP and TRGP were the only ones with back to back positive weekly gains.
News of the (MLP) World
There was a surprising equity offering from GEL this week, but the trend of positive after-market performance for MLP offerings was maintained. No big M&A, but KMI announced an open season for their proposed solution to what has become a clear need for natural gas takeaway options from the Permian. EPD announced a similar project at their analyst day a few weeks back. ETP and Atmos also have natural gas systems connected at Waha that could compete for takeaway solutions, but EPD and KMI seem to be moving faster.
Capital Markets
Growth Projects / M&A
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