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March 2, 2012

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Winners & Losers: Dirty Week for Coal, Active Week for MLPs

MLPs had a decent week, down 0.8%, considering the amount of MLP equity issued (around $800 million), and the price declines in oil and natural gas week over week.  Stocks were up slightly and gold was down 3.4%, slightly more than oil.  It was easily the most active week of corporate finance and M&A activity for the sector so far this year.  There were 4 M&A deals, 2 bond deals, 3 equity deals, and a closed-end fund equity offering for $236 million.  Oh, and there were 14 earnings announcements, mostly for the small cap MLPs that offer the best opportunities for a smaller firm like ours.  Lots of press releases and conference calls still to digest, so with this post the focus will be on what happened, more thoughts on the deals in my late weekend post.

Cheniere Energy Partners was the biggest winner this week, after disclosing $2 billion in financing from Blackstone Group.   E&P MLPs were also big winners this week, up on generally rising oil prices I guess, even though oil was down 3% this week (most of that on Friday).   MEMP was up big despite being almost exclusive a natural gas producer, whereas MCEP (up 5.6%) is mostly oil.
Biggest loser by far, with the biggest week over week decline I can remember (at least in the last few years), was Oxford Resources (OXF), which announced basically negligible distributable cash flow for the fourth quarter of 2011.  This was followed by a series of embarrassing downgrades from research analysts, which was unfortunate for the few that had buy ratings on OXF.  On any metric, OXF was cheap heading into earnings when looking at trailing results, but its the future that matters.  Another coal operator, RNO, was collateral damage from the OXF selling, despite announcing better than expected earnings.  EPB announced weak earnings that caught investors off guard.  EPB may have also suffered a bit as a result of KMI deal looking more and more certain.  EPB had been slowly recovering from the beating it took in October after the KMI acquisition announcement.  There may have been some investors holding out hope that KMI deal would fall through.    Sidenote: KMI was up 9.2% this week.

Year to Date

MLPs are still having a solid year, up 4.6%, but stocks and gold are still winning.  GPs (up 7.1%) are still leading MLPs so far this year.  KMI and ATLS led the way for them this week.  Another strong week for variable distribution MLPs helped extend their lead.

OXF dropped to the bottom of the sector, displacing NRGY, which I honestly thought would remain at the bottom for the entire year.  EROC joined the bottom five this week, as they continue to face pressure as a result of low natural gas prices and disconnect for NGL prices at Conway compared with Mt. Belvieu.  CQP jumped back to the top of the sector YTD this week, just edging out MCEP.

More later this weekend.  Thanks for reading.

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