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August 17, 2014

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Week Thoughts: Rising Boat Lifts MLP Tide

Kinder Morgan’s big Sunday announcement sent MLPs into a tizzy, read more about the deal here.  The MLP Index was up 5.3% this week, with much of that attributable to just 2 MLPs (EPB and KMP) that make up more than 10% of the Alerian MLP Index.  5%+ weeks are very rare.  There was a period of 6 years from 2002 to 2008 that the MLP Index had no such weeks.  This was only the 4th such week for the Index in the last 5 years.
Yield on the U.S. 10 year rates crossed back over the 2.40% threshold again, stocks are up, and MLP consolidation is driving speculation among smaller MLPs.  All is right for MLPs…except for weakening energy commodity prices.  The U.S. is clearly having an impact on the global supply picture when an aggressive Russia and (that old standby) tension in the Middle East don’t stop oil prices from falling.
Weekly MLP Review_8-15-14
Updated Distribution Aristocrats
A few years ago, I published my list of MLP Distribution Aristocrats (see original post here).  As part of my work on KMP this week, I updated the list.  MLP “Distribution Aristocrats” are MLPs that have raised their distribution in each of the last 10 years.  To qualify, the MLP also needs to have been trading for 10 years.  There are only 10 MLPs that meet both criteria.  After KMP goes away, there will only be 9, but as more MLPs reach the 10 year trading mark, the list will grow.
Distributin Aristocrats
Winners & Losers
EPB led all MLPs with a 27.7% pop earlier this week.  The unitholders that held on even after EPB announced earlier this year its intention to have no distribution growth until 2017 were handsomely rewarded with a white knight.  No matter that the savior (KMI) was the company that was responsible for EPB’s slowing growth rate since the 2012 purchase of EPB’s GP.
MMLP also had a nice pop related to an acquisition this week, up 12.0%, after a bottom 5 showing last week.  Speaking of the bottom 5, HCLP was down after issuing equity this week, and after being up 8.0% last week.  Also, there were 2 upstream MLPs in the bottom 5, perhaps taking cues from weaker commodity prices.  Growth is back en vogue as low yield, high growth MLPs were up sharply this week, epitomized by PSXP’s big gains.
Top5Bottom5_8-15-14
 

Top5Bottom5_8-15-14_chart

Year to date, PSXP is still out in front, although SUSP jumped HCLP to take second place.  MMLP climbed out of the bottom 5 this week, replaced by recent coal IPO FELP.  CMLP had a positive week, but remains in the bottom 5, until its white knight appears.
Top5Bottom5_8-15-14_YTD
 

Top5Bottom5_8-15-14_YTD_chart

News of the (MLP) World
There were a few interesting deals outside of the Kinder Complex this week, including a series of equity deals and announcements.  It was a flurry of capital markets activity that I don’t expect we’ll see again until after Labor Day, although there’s always time for M&A.
News-of-the-World
Equity

  • Buckeye Partners (BPL) priced public offering of 2.6mm common units at $76.60/unit, raising $199.2mm in gross proceeds (press release)
    • Overnight offering, priced at 2.6% discount to prior close
  • Hi-Crush Partners (HCLP) priced 100% secondary offering of 3.3mm common units at $62.91/unit, raising $205.1mm in gross proceeds to selling unitholder Hi-Crush Proppants, LLC (press release)
    • Overnight offering, priced at 4.2% discount to prior close
  • Viper Energy Partners (VNOM) files S-1 to sell 3.5mm common units in an equity offering (filing)
    • VNOM also disclosed an acquisition of Permian acreage for $90mm in cash
  • Cheniere Energy Partners LP Holdings (CQH) files S-1 to sell 10.1mm common shares in an equity offering (filing)
  • GasLog Partners (GLOP) files F-1 to sell up to $125mm of common units in an equity offering (filing)
  • Rice Energy announces plans to form a midstream MLP for its gas gathering and water sourcing assets (press release)

M&A / Growth

  • Kinder Morgan, Inc. (KMI) to acquire KMP, KMR and EPB
    • Click here to peruse around 2,000 words on this deal
  • MMLP acquisition of remaining interest in Cardinal Gas Storage for $120mm (press release)
    • MMLP to acquire 57.8% interest owned by Energy Capital Partners
    • Accretive to distributions by $0.15/L.P. unit by end of 2015, and MMLP expects to increase distribution by $0.02/unit in 4Q14
    • Transaction increases MMLP’s coverage to above 1.05x
    • Over 90% of working gas storage capacity contracted with 5 year weighted average contract life
    • Improves fee-based contract mix and reduces seasonality
  • GLOP $328mm acquisition of two vessels (press release)
    • Vessels have 5.5 and 6 years remaining on contracts
    • Acquisition value represents 9.5x next 12 months EBITDA
    • Announced intent to raise distributions by 15%

 

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