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August 18, 2013

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Week Thoughts: Summer Closeout - Stocks, Treasuries and MLPs Marked Down

MLPs dropped 2.1% this week, roughly the same as the S&P 500 (-2.0%).  MLPs were unable to withstand the broader market breakdown for two consecutive weeks, and the multiple MLP equity offerings we saw this week.  So after outperforming last week when the S&P 500 was down 1.0%, MLPs succumbed this week.  While MLPs were down for the week, the losses happened early in the week and MLPs were actually up slightly on the weakest day of the week for the S&P 500 (Thursday).
Usually, when the market falters, at least some of the money flows into US treasuries.  That didn’t happen this week, with the US 10 YR interest rate rising to a fresh 52-week high at 2.83%, which doesn’t bode well for MLPs.  Gold was the trade of the week, up 4.5%.  Energy commodities were also all up this week, with propane continuing its recent run up another 5.3% to lead the way this week.

Weekly MLP Review_8-16-13

Short post this week and probably next week to recharge my batteries.  Expect MLPs to drift higher once the equity printing presses shut down in late August.
Winners & Losers
GLP bounced back this week to lead the MLP sector with 9.2% pop.   The news that MMLP was getting a new GP partner in Alinda Capital sent it higher Thursday.  The list of independent GPs with no private equity or corporate backing continues to shrink.  Expect those MLPs that still have an unattached GP to outperform going forward.  On the negative side, EVEP was down 10% in what seems to be a reaction to the news from last Friday on the first sale of Utica acreage.  Also notable, USAC was down on earnings and the acquisition announcement that adds 7.4mm to the unit count.

Top5Bottom5MLPs_8-16_13

For the year, no change in the bottom five constituents.  On the top five, MMLP and AMID popped into the top five, LGP and BPL dropped out of the top 5.

Top5Bottom5MLPs_8-16_13_YTD

News of the (MLP) World

News-of-the-World

Equity

  • Northern Tier Energy (NTI) prices public secondary offering of 11.5mm common units at $22.85/unit, raising gross proceeds of $262.8mm for selling unitholder Northern Tier Holdings
    • Overnight deal, priced at 4.0% discount to prior close, no change from pricing in next trading session
  • Access Midstream (ACMP) prices public secondary offering of 8.0mm common units at $46.47/unit, raising gross proceeds of $371.8mm for selling unitholder Global Infrastructure Partners
    • No primary units issued
    • Overnight deal, priced at 4.5% discount to prior close
    • ACMP traded up 0.7% in the next trading session
  • Rose Rock Midstream (RRMS) prices public offering of 4.75mm common units at $33.44/unit, raising $158.8mm in gross proceeds
    • Overnight offering, priced at 3.9% discount to prior close
    • Closed next session down 2.1% from pricing
  • Kinder Morgan Energy (KMP) files equity distribution agreement to sell up to $1.9bn at the market

Debt

  • Plains All American Pipeline (PAA) prices $700mm of 3.850% senior notes due 2023 at 99.792% of par
  • Access Midstream (ACMP) prices $400mm of 5.875% senior notes due 2021, adding on to previous April 2011 $350mm 5.875% senior notes due 2021 with a yield to worst of 5.503%
  • NuStar Energy (NS) prices $300mm of 6.750% senior notes due 2021 at par

M&A / Growth Projects

  • StoneMor (STON) announces $5mm acquisition of Virginia-based Forest Lawn Cemetery
  • USA Compression (USAC) announces $187mm acquisition of compression assets from S&R Compression
    • USAC to acquire compression assets from S&R Compression from an affiliate of George B. Keiser
    • USAC will acquire 983 compression units (138,000 HP), with an average age of 2.2 years and average utilization of 95%
    • Units deployed primarily in Oklahoma and Texas, in the Mid-Continent, Haynesville and Fayeteville regions
    • Transaction funded with approximately 7.4mm USAC common units issued to the Kaiser affiliate
    • USAC expects to close the acquisition in 3Q13 (by the end of August is likely)
  • Calumet Specialty Products (CLMT) announces acquisition of 7 crude oil loading facilities from Murphy Oil USA

Other

  • Martin Midstream Partners (MMLP) announces that its GP will sell a 49% voting interest (50% economic interest) to Alinda Capital Partners
  • Plains All American Pipeline (PAA) announces discontinued JV with Keyera Corp. for development of the Western Reach Pipeline system

Distribution Announcements

  • Variable: NTI: $0.68
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