August 17, 2014
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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.
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.
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.
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.
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.
Equity
M&A / Growth