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

July 16, 2017

Viewed 2166 times

Week Thoughts: Prime Conditions Prolong MLP Primacy

The MLP Index finished the week decisively above 300, up 9.9% from its recent (6/21) low, after a 1.9% week that included a furious late Friday ramp.  Oil prices rose each day of the week, including 4 straight 1%+ days to finish the week.  MLPs resisted rallying for most of the week, but eventually relented.

Just when sentiment was at its worst and catalysts seemed so far away, MLPs string together 3 straight positive weeks, beating the S&P 500 in each one.  But this week it took an optimal environment, including: big positive moves in commodity prices, no equity offerings and falling interest rates.

Sub-optimal conditions are likely to return, and MLPs will need some sector-specific and stock-specific reasons to keep the momentum.  As such, all eyes will turn to MLP earnings season in a few weeks, even if expectations are fairly low for 2Q results.  More important than results are the current conditions and insights in to 3Q results.
Reiteration of 2017 guidance and indications of in-flight 3Q volumes on conference calls may satiate the market, and “prime” the pump until 3Q results can confirm guidance from most MLPs calling for volume strength in 2H 2017…. But by then, the focus will have shifted to 2018 outlook, which will depend on oil prices… such a vicious cycle.
Winners & Losers
Beta worked this week.  CCLP and APLP, among the biggest losers last week, were among the biggest winners this week.  Propane MLPs were the worst performers.  Big YTD winners NBLX and WNRL were likely sources of funds.


YTD Leaderboard
CPLP continues to climb the leaderboard, and sits atop the list of MLPs that still exist (PTXP was acquired).  NBLX and WNRL declined slightly, losing ground as others gain steam.

The bottom 5 from last week all traded up, with the exception of TOO, which took over the bottom spot.

General Partners & Midstream Corporations
GPs and Corps outperformed the MLP Index this week.  Not a single one was negative.  SEMG and AROC went from worst to first, tracking oil prices higher.  TRGP bounced on commodity price strength and their non-deal roadshow this week.  TEGP had some resolution on the Ultra settlement.


News of the (MLP) World
After wading through all the press releases announcing conference call schedules for 2Q results (and re-schedules for EPD, stay tuned there), there was actually a surprising amount of news flow for a sleepy week in July.  Nothing earth shattering, but lots of small things on the periphery of the sector.

Capital Markets

  • ONEOK (OKE) announced public offering of $1.2bn of senior notes (press release)
    • $500mm of 4.00% notes due 2027
    • $700mm of 4.95% notes due 2047
  • Western Gas Partners (WES) filed $500mm common unit shelf (filing)
  • Cheniere Energy Partners (CQP) registered 199mm common units for holder Blackstone Group (filing)
    • Class B shares will convert on August 2 at which point Blackstone will own over 40% of CQP units
  • Private company Greenfield Midstream announced $300mm equity commitment from EnCap Flatrock Midstream (press release)
    • Greenfield is pursuing select acquisition opportunities across a range of midstream asset types
    • Management team includes former employees of DCP, EPD, NBLX, and Azure

Growth Projects / M&A

  • Williams Partners (WPZ) placed into service first phase of its Hillabee expansion project (press release)
    • The Hillabee expansion project will add a total of approximately 1,131,730 Dt/d of pipeline capacity to the Transco system by 2021
  • Enterprise Products (EPD) and Navigator Holdings announced agreement to jointly pursue ethylene marine export terminal on the Houston Ship Channel (press release)
    • The terminal would be connected to EPD’s high-capacity ethylene salt dome storage and ethylene pipeline system, which is currently under construction
    • Pending commercial contracts
  • Couche Tard, sponsor of CrossAmerica Partners (CAPL), announced acquisition of 522 Holiday Stationstores, Inc. convenience stores in the upper Midwest (press release)
    • Sites are in 10 states, concentrated in Minnesota and Wisconsin
    • Acquisition includes fuel terminal in Newport, Minnesota, which supplies 1/3rd of the stations

Other

  • Valero Energy (VLO) and Plains All American (PAA) plan to challenge attempt to block proposed acquisition by Valero of certain Plains assets (press release)
    • The Northern District Court of California denied the CA Attorney General’s motion for a temporary restraining order seeking to block the proposed transaction
    • The AG filed its motion despite the fact that the FTC recently ended an extensive investigation of the same transaction, ultimately concluding that the transaction merited no regulatory action
  • Rockies Express Pipelines (REX) and its operator, Tallgrass Energy (TEP), announced receipt of $150mm cash settlement payment from Ultra Resources (press release)
    • Payment was in connection with the settlement of REX’s $303mm breach of contract claim
    • REX has distributed the proceeds to its partners
  • Alerian to be acquired by Hong Kong-based investment firm ZZ Capital for $582mm in cash and $230mm in earn outs (Reuters)
    • ZZ Capital is publicly-traded, but has a market capitalization of just $218mm
    • Alerian initiated a sales process in early 2015
    • Sector participants continue to await an update from Alerian on how to deal with the exodus of MLPs from the structure (KMP, OKS, NGLS, etc.) and the shrinking number of constituents in the flagship index
  • Energy Transfer (ETP) announced new distribution re-investment plan (press release)
    • Discount for DRIP program will range from 0% to 5%, but will start at 2.5%
  • CONSOL Energy (CNX), sponsor of CONE Midstream and CNX Coal Resources, announced filing of form 10 registration statement for spin-off of its coal business (press release)

Distribution Announcements

  • Slow distribution season so far, expect a ton of distribution announcements this week and next.

RELATED CONTENT
No posts matching your criteria
MLPguy Post
Final K-1: MLPguy Transition to New Era Starting this week, you will find my usual weekly updates on the midstream / MLP sector at mlpguy.substack.com.
MLPguy Post
Week Thoughts: Midstream Rides Market Jet Stream Higher Midstream stocks took some lumps with earnings announcements, but strength in oil prices, energy stocks (S&P Energy +8.3%) and the S&P 500 was enough to carry midstream to a strong positive week.
MLPguy Post
Week Thoughts: Midstream Pumped, Market Dumped Midstream indexes followed the S&P 500 lower this week, but MLPs outperformed factoring in distribution ex-dates from this week.
MLPguy Post
Week Thoughts: Midstream Better for Sale Midstream traded down each day this week and finished down 3-6% across the different indexes, reversing some of the early 2021 gains.
MLPguy Post
Week Thoughts: Midstream Re-Run Energy stocks, midstream stocks, and MLPs ran back last week’s action with another big week. Like last week, it was 4 straight green days followed by a weaker Friday.
MLPguy Post
Week Thoughts: Big Score for Midstream Midstream broke a 4-week losing streak and rang in the new year with a bang, rallying 7-8% across the midstream indexes. The big week was just the 3rd best week for MLPs since the vaccine news turned things around in early November.
MLPguy Post
Week Thoughts: Another Lost Week, Year for Midstream The short final week of the year was good for most stocks, but Midstream stocks were left out again. The S&P 500, utilities and infrastructure stocks traded up, along with oil and natural gas prices.
MLPguy Post
Week Thoughts: Midstream Santa Rally Melts Midstream underperformed the market for a third straight week after its massive bounce in November and early December. The group is clinging to a positive month of performance with just 4 more trading days left...
MLPguy Post
Week Thoughts: Midstream Checks Out Stocks, oil prices and natural gas prices were all up this week, but midstream stocks took a step back and appear to be coasting to the finish line for the year after the rush to re-position over the last few months.
MLPguy Post
Week Thoughts: Midstream Stalls at Altitude Midstream was mixed this week, with MLPs closing slightly lower after 4 very strong weeks of positive performance. Positive performance from some of the larger corporations in the U.S. and Canada helped the broader midstream indexes finish positive and keep pace with energy stocks...
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.