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March 24, 2012

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MLP Weekly Winners & Losers: Cai-Man Down! WPZ Drops on M&A Announcement

MLPs were roughly flat this week, compared with a 0.5% drop for the S&P, which was only the second week over week decline for the S&P 500 so far in 2012.  China economic data weighed on stocks this week, and MLPs went along for the ride.  Oil bounced around but closed close to flat for the week, while natural gas was down big again at 3.2%.  There was strength in MLP GPs and variable distribution MLPs as there has been all year so far.

OXF got a big bounce this week, up 27.1%, after the coal MLP announced that at least through 2012 it will pay its distribution.  At last Friday’s close, OXF was yielding 24%.  Phillip Trinder over at MLP Protocol had a good post earlier this week that covered OXF’s announcement in more detail.
On the losing side, equity offerings from Genesis Energy (GEL) and Regency Energy (RGP) and expectations of a large equity offering from WPZ  pushed those  MLPs to the bottom of the pile this week.  WPZ issued equity in late January at $61.81 per unit.  If you bought into that equity offering, then you have lost 9.4% of the value (8.2% if you count the distribution received).  WPZ announced the acquisition of Caiman Energy on Monday for $2.5 billion, including $1.7 billion of equity to WMB and to the seller.  With all of that equity, the GP is the biggest beneficiary just as a result of the GP math (see this post for more on that).  Management left open the possibility that some of the cash portion of the acquisition would be funded with even more equity at some point, which spooked the market (read the press release here).  Valuation for Caiman was high up front, given that the assets are still early on in their development.  The high up front price may have turned off some investors.

Top five biggest gainers and top 5 biggest decliners for the week.

Also not pictured here is the 4.7% gain by Kinder Morgan Inc (KMI) to close at a new all time high.

MLPs still trail most everything year to date, and natural gas prices are still way down.  At some point oil supply may overwhelm infrastructure and demand domestically, which could send oil prices lower, but for now Oil is up.

Even with a 27% week over week gain, OXF retains the bottom spot of all the MLPs, and it continues to be all coal and propane at the bottom.

More to come with my weekly post tomorrow.

Disclosure: The information in this article is not meant to be financial advice, I am not your financial advisor and I am posting my comments for informational purposes only.

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