Author: Hinds

Midstream overall outperformed and MLPs again led the way, up another 3.1%.  The MLP Index is now up 14.4% the last 8 weeks, rallying in 6 of those 8 weeks.  Energy and oil prices continue to trade well, with MLPs tryng to keep pace with broad energy stocks.  News flow was light until Thursday’s simplification party.  Weaker Canadian and utility performance dragged down the broader AMEI midstream index performance.

Back in November, I published a report on distribution growth (or lack thereof) across the MLP landscape.  The basic takeaway was that certain industry participants were citing numbers that seemed to exaggerate distribution growth and sweep under the rug the actual change in income felt by those who owned a diversified basket of MLPs over the last few years.  In addition, I argued that distribution yield as a valuation metric should not be considered in an environment of uncertain distributions, and instead cash flow per share and EBITDA multiples were better metrics to use.

Midstream resumed gains this week, with similar gains across MLPs, U.S. and Canadian corps.  Oil and the broad stock market rallied as well.  No surprise, but $70/bbl seems to be a positive for energy stocks broadly.  Midstream-specific sentiment has also benefitted from solid earnings season that included baby steps towards resolution of pending simplifications, de-leveraging, etc.  The MLP Index is just one more good week away from being flat for the year (including distributions).

It was a pretty great week for Midstream (AMEI +1.9%), but not so much for MLPs (-0.2%).  The busiest week for 1Q earnings started exciting with a big merger of MLP sponsors and very strong 1Q results from big MLPs EPD and MPLX.  As the week continued, however, MLP investor sentiment was dealt another blow with a surprise distribution cut from TCP and weak results from BPL.

After back-to-back 3% weekly gains, MLPs traded up slightly for a third straight week, slightly ahead of the S&P 500.  As discussed last week, MLPs haven’t had 3% gains 3 weeks in a row ever, so this week’s pause is not a surprise, especially with flat broad market and oil prices.

Midstream posted another strong week overall, and MLPs led the way again, up 3.5% for a second straight week.  The midstream rally couldn’t be stopped by another 13 basis points added to the U.S. 10-year interest rate.  The rally even withstood a Tweet from President Trump about how oil prices are too high.  As good as the overall week turned out, the rally was confined to just 2 days, with negative returns in the other 3, just like last week.

Midstream had a solid week, pulled higher by rallies in energy stocks and oil prices.  Tuesday was the best day for MLPs all year (+3%) and Wednesday saw follow through, but the other 3 days were negative.  Midstream performance was torn between improving sentiment for energy stocks and negative price action among income-oriented stocks like utilities and REITs, which under-performed on higher interest rates.

Amidst broader market volatility, midstream held up and outperformed this week.  Relative strength for midstream happened Monday when market was down big and on Thursday when the market rebounded.  I’m going to try not to get too excited about a single week, but an optimist (e.g. myself from 2015) could see a path towards a midstream bottom if growth stocks in the broad market lose their luster and investors begin seeking value in beaten down sectors like energy.

A strong Thursday saved the week for Midstream and MLPs, which both finished marginally positive, but trailed the broad stock market and utilities.  Oil prices were down slightly but weren’t much of a factor.  Midstream sold off Tuesday in what felt like end of quarter window un-dressing after a double digit negative quarter.

Another rough week in Midstream, the worst in nearly 2 months. Midstream and MLPs overall did outperform the S&P 500, though, which had its worst week 2+ years.  MLPs fared the worst, down 5.5%, U.S. midstream corps were down 4.2%, matching the AMEI index (proxy for midstream universe), and Canadian Midstream outperformed both.