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October 5, 2013

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Week Thoughts: Stalemate in DC, Stocks and MLPs

It was a pretty boring week for the market, but there is a pretty intense staring contest going on in Washington DC (which for me personally is not helping to replace the drama void the end of Breaking Bad left behind)… The MLP Index and the S&P 500 ended flat week over week.  Also, commodities and treasuries were flat as well.  We love personifying the behavior of the stock market, even though it’s movements are just a series of distinct buys and sells.  But it does feel like the market is treading water waiting to see how long this shutdown lasts and what impact it could have on GDP growth or corporate profits (prolonged shutdown increases drag on everything, except maybe political tension).  The MLP market was active enough, however, to take down around $725mm of MLP equity, including another double-digit-yielding IPO.

Weekly AMZ_10-4

 MLPs did show some signs of life early in the week, but then drifted lower through the back half of the week to close flat alongside the S&P 500.

Weekly Chart AMZ_9-27

I spent around 24 hours of my week in Colorado, with around 40 of my colleagues (buy and sell side), a hard hat and a pair of steel toed boots.  It was a tour of some of APC’s Wattenburg field operations and of WES’s under-construction Lancaster Plant.  There were some very impressive and informative folks leading the tour, and they proved to be very patient with all the questions from city-fied tourist crowd.  It was clear blue skies and little sign that there had been a 500 year flood in the area a few weeks earlier.   The areas we drove through were bustling with activity, see below for some pictures I took.

Winners & Losers
A hodgepodge at the bottom and top again this week, which is typical of a flat week with little news… NRGM and CMLP were both up in tandem, and they are almost officially finished with the merger process.  Beginning on Tuesday, the tickers NRGY and NRGM will officially go away.  In a stunning display of creativity, NRGM will become Crestwood Midstream Partners (trading under ticker CMLP), while NRGY will become Crestwood Equity Partners (trading under ticker CEQP).  The biggest loser of the week after issuing a recast of financial statements removing non-strategic assets from operating results and plcing them into discontinued operations. AMID was in the bottom five last week as well, and is down 14% in the last 2 weeks, but has still produced more than 50% total return YTD.


For the year to date chart below, I’ve removed OXF, which has a per unit price below $2.00 and doesn’t pay a distribution.  EVEP is now the low MLP on the list, and the new extra spot goes to FISH, which entered the bottom five for the first time since its IPO.  MMLP replaced AMID in the top 5.


News of the (MLP) World
Several equity deals, another IPO on the road (WNRL), a few distribution announcements, and some dueling LPG announcements this week.



  • OCI Partners (OCIP) prices MLP IPO of 17.5mm units at $18.00/unit, raising $315mm in gross proceeds (filing)
    • Priced below the filing range of $19.00 – $21.00
    • Traded down as low as $16.08 (-10.7%), before bouncing to close up 4.4% in its first trading day
    • IPO yield of 11.94%
  • Western Refining Logistics (WNRL) launches IPO of 12.5mm common units with a midpoint IPO yield of 5.75% (prospectus, roadshow)
    • Midpoint IPO yield of 5.75% ($1.15/unit minimum quarterly distribution)
    • Logistics assets of Western Refining, Inc.
  • Memorial Production (MEMP) prices offering of 14.5mm units at $19.90/unit, raising gross proceeds of $288.6mm
    • One day book build, 5.42% file-to-price decline
    • MEMP traded down 1.2% from pricing in the next session
    • MEMP to receive gross proceeds of $288.6mm, net of which will be used to repay borrowings under its revolving credit facility
  • Teekay LNG (TGP) prices offering of 3.0mm units at $42.62/unit, raising gross proceeds of 127.9mm
    • Overnight offering, priced at 3.72% discount to prior close
    • Gross proceeds of $127.9mm, net of which will be used to partially fund the acquisition of a second LNG carrier newbuilding and for general partnership purposes
    • TGP traded flat from offer price in the session following pricing
  • Summit Midstream (SMLP) files S-3 to register up to $1.2bn worth of primary units and 14.7mm secondary units held by its GP (filing)
  • Enterprise Products (EPD) files S-3 to register up to $1.25bn worth of common units (filing)


  • Magellan Midstream (MMP) prices $300mm of 5.15% senior notes due 2043 at 99.56% of par to yield 5.179% to maturity

M&A / Growth Projects

  • Enterprise Products (EPD) announces construction of new LPG export terminal on the Gulf Coast (press release)
    • Upon completion of the new terminal, which will have capacity of 6.0mm to 6.5mm bbls/month, EPD will have aggregate capacity to load 15-16mm bbls/month of low-ethane propane and/or butane at its LPG marine terminals
    • This terminal is expected to be in service by Q4 2015 and is expected to be operating at or near its capacity upon startup
    • Terminal is backed by long-term contracts with more than 25 customers, some contracts extend into 2024
  • Boardwalk Pipeline (BWP) and Williams (WMB) sign JV agreements for proposed LPG export terminal (press release)
    • Previously-announced Moss Lake LPG Terminal, located near the Calcasieu River, Louisiana, will serve tanker ships, providing Marcellus and Utica producers with access to international markets
    • Combined with related Moss Lake Fractionation and Bluegrass Pipeline Joint Ventures, will offer additional downstream market for NGLs
    • Terminal will store 900,000 barrels of fully refrigerated propane and butane with a load rate of 25,000 bph
    • If all conditions are satisfied, project could be placed into service in late 2015
  • Inergy Midstream (NRGM) and Crestwood Midstream (CMLP) announce merger vote passed, merger will close Monday, NRGY and NRGM tickers will be replaced by CEQP and CMLP.


  • PAA: $0.60, +2.1% quarter over quarter
  • MEMP: $0.55, +7.1%
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