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February 25, 2012

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Winners & Losers: Oil and Gold Outshine MLPs

The MLP Index finished this week up for the fourth straight week, and up for 7 of the last 8 trading days.  It was also the second straight week that the index finished at all time highs.  The S&P 500 finished up for the second straight week, as well, but only slightly.  Oil was the story this week, rising 5.5% on geopolitcal tension.  Natural gas was down 4.5%, certainly more reflective of domestic supply and demand than oil prices.  GPs were up 1.9%, behind strong weeks from KMI (+3.1%), XTXI (+4.5%) and TRGP (+5.7%).

HEP was down the most this week, going from first last week to worst this week, but remains more than 11% up for the year.  EROC was down 4.5% after announcing weaker earnings on low natural gas prices.  FGP was the leader this week, recovering from Moody’s downgrade a few weeks ago, and maybe surprising the market by not cutting its distribution, and declaring a flat distribution for the 65th straight quarter.

Year to Date
MLPs are catching up to the S&P 500 for the year.  Gold continues to outperform the market, up 13.3% YTD.  Oil has reached nine month highs, and is up 10% for the year, and natural gas continues to trade poorly as we wait for drilling to slow down or demand to pick up, both unlikely.  General partners holding companies are outperforming year to date, as expected.  I expect to see KMI perform well next week after the $7.2 billion sale of EP’s E&P business on Friday, further adding to GP outperformance.

The bottom 5 year to date saw some turnover last week.  FGP, SPH and BPL climbed out of the cellar, crowded out by 3 coal MLPs: OXF, NRP and ARLP.  In the top five, little changed, although HEP fell out of the group, replaced by AMID.

More detailed thoughts on the week in tomorrow’s Week Thoughts post.  Have a great weekend, I’ve got my hands full with my son’s 3rd birthday today.

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