Got Liquids?

Source: Hinds Howard, MLP HINDSight (4/14/12)

"A sharp decline in the 10-year interest rate helped MLPs outperform this past week."

Happy distribution announcement season! So far 8 MLPs and 1 GP have announced their distributions for the 1st quarter 2012. 6 out of 8 MLPs increased distributions, with average distribution growth of 2.3% quarter over quarter. All of that equity and capex from last year should start to bear fruit in the next few quarters, and lead to a strong year of distribution growth overall. As that growth becomes more evident, I expect MLPs to narrow the very wide performance gap between the MLP Index and S&P 500. This week may have been the start of that comeback by MLPs. MLPs were down ONLY 1.1% this week, compared with 2.0% for the S&P 500. MLPs are still slightly negative on a YTD basis, compared with 9.0% for the S&P 500.

A sharp decline in the 10-year interest rate helped MLPs outperform this week. The 10-year closed at 2.0% this week, and it may test the year to date low of 1.8%. If that happens, it will be the result of some crisis in Europe, or the result of a series of bad economic data from China or the U.S. If that were the case, stocks would likely struggle, and MLPs would come back into favor as a high yielding defensive investment with the tailwinds of a secular growth industry: domestic energy production.

Speaking of domestic energy production, natural gas hit fresh lows this week, closing the week under $2.00 per mmbtu. Fresh lows for natural gas prices translated to fresh annual highs for the companies that are poised to most directly benefit, such as $LNG (up 7.4% Friday) and $TNH (up 12.3% for the week). Generally, energy stocks lagged this week, as represented by $XLE in the chart below. The S&P 500 was down for the second straight week. MLPs very closely mirrored the S&P 500 until the S&P 500 broke lower Friday and MLPs held flat.

So, the markets look fairly bleak, but there are pockets of good performance within the energy industry and within the MLP sector. The key appears to be resisting the temptation to fall into MLP value traps. No matter how attractive the relative valuation of EROC, APL and BWP look, they will break your heart in the absence of a natural gas price uplift, which is not coming soon. I own EROC and APL, so I am guilty of this as well, which is a result of my instinct to be wary of obvious trends and what everyone thinks they know.

But for now, liquids-focused MLPs (I am considering crude oil a liquid here) are still your best bet, but the trick is to find liquids-focused MLPs at a good price. Best time to find those reasonably-priced, liquids-focused MLPs is either (1) during times like this when the market pushes everything down, (2) after an equity offering or (3) a combination of both. Also, as you will read below, all of the M&A activity these days is rich-gas, NGL or crude focused. Liquids remain the story that works, no matter how cheap dry gas focused MLPs look.

News of the (MLP) World

Enterprise Products, Anadarko Petroleum and DCP Midstream LLC announce new NGL pipeline (press release):

435 mile NGL pipeline from DJ Basin in Colorado to Skellytown, TX
Each party will own 1/3^rd of the JV
Pipeline will be called Front Range Pipeline
Initial capacity expected to be 150 mbpd, with potential to expand to 230 mbpd
Expected to be in service in 4Q 2013
Volumes anchored by NGL volumes produced from facilities owned by APC and DCP Midstream
Related story: DCP Midstream Partners Acquires 10% Stake in Texas Express Pipeline from EPD for $85 million (press release).

QR Energy Equity Offering (press release)

Combination primary and secondary offering
Priced at $19.18, 9.5% yield
6.2mm primary units sold for $119M
11.3mm units sold by Quantum, $217M in gross proceeds to Quantum
Quantum still holds around $460M in QRE equity in the form of preferred and subordinated units

Penn Virginia Resource Partners announces acquisition of Chief Gathering LLC for $1.0 billion (press release)

Marcellus assets
By Year end 2013, midstream business unit will account for 75% of PVR’s EBITDA, up from 40% today
$1.0 billion purchase price will be funded with combination of cash and $200M in special units that don’t pay distributions until conversion in 6 quarters
$800 million cash portion will be funded with:

$400M in units of new class of PVR Class B Units that pay distributions in the form of more Class B Units until conversion in 8 quarters. Riverstone is the purchaser of these units
$180M private placement of common units to Kayne Anderson and Magnetar Capital
$220M senior unsecured bridge facility, although PVR plans to issue term debt rather than draw on this facility

Transaction expected to generate around $154 to $167 million in 2014, or a 6.0x to 6.5x EBITDA multiple
Assets include 6 gathering systems, with 100% fee-based contracts

ONEOK Partners to build 1,300 mile Bakken to Cushing crude pipeline (press release)

Will invest $1.5 to $1.8 billion between today and 2015
1,300 mile crude oil pipeline with 200,000 bpd capacity extending from Bakken Shale to the Cushing, OK crude hub

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. Long EPD, OKS, APL, EROC.

Hinds Howard, MLP HINDSight

NGL Energy Shares Rise 21% as It Seeks to Raise $2.05 Billion from Senior Secured Note Offering
Source: Streetwise Reports (01/21/2021)

Shares of NGL Energy Partners LP traded higher after the firm made a series of announcements over the past three days regarding an update on financial operations, a settlement with a customer in bankruptcy, a quarterly Class D unit distribution and a $2.05 billion senior secured debt offering.

Western Midstream Posts 99% YoY Increase in Q3 Earnings, Announces $250 Million Buyback Program
Source: Streetwise Reports (11/10/2020)

Shares of Western Midstream Partners traded 23% higher after the company reported Q3/20 financial results that included a nearly 100% growth in Net income. The firm also provided FY/21 guidance and announced a $250 million buyback program.

Altus Midstream Shares Flow Higher on Q3 Earnings and Plans for $1.50/Share Dividend in Q1/21
Source: Streetwise Reports (11/05/2020)

Shares of Altus Midstream Co. traded 170% higher after the firm reported Q3/20 financial results and announced plans to pay a quarterly dividend of $1.50 per share beginning in March 2021.

Announcing Streetwise Live! Events
Source: Streetwise Reports (07/13/2020)

Streetwise Reports is offering 100 investors—at no charge—the opportunity to meet via Zoom with executives of precious metals companies as they discuss recent developments at their companies and upcoming catalysts.

NGL Energy Partners Shares Rise 80% as the Firm Confirms 2020 Guidance
Source: Streetwise Reports (03/19/2020)

Shares of NGL Energy Partners traded higher after the company confirmed its fiscal 2020 EBITDA guidance and provided an update on current operations and capital expenditure reductions.

Tallgrass Energy Shares Rise 20% on Blackstone Partners Acquisition Deal
Source: Streetwise Reports (12/17/2019)

Shares of Tallgrass Energy LP traded 20% higher after the firm advised that it entered into a definitive merger agreement with Blackstone Infrastructure Partners to acquire all of the company's publicly held outstanding class A shares for $22.45 per share in cash.

Analyst: Outlook Positive for 'Water-Driven Turnaround Story'
Source: Streetwise Reports (01/04/2019)

This master limited partnership's presentation to analysts provided Raymond James with multiple reasons for long-term investment.

Simplification: A Positive Change for MLP Industry, Investors
Source: Adam Karpf for The Energy Report (05/30/2017)

The master limited partnership (MLP) industry, focused on energy infrastructure, is in the process of a major transformation known as "simplification," where limited partners have merged with or acquired the interests of the general partner. Adam Karpf, portfolio manager for MLP strategies at CIBC Atlantic Trust Private Wealth Management, discusses the trend toward simplification and the benefits for management teams and investors.

A Year of Tips for Winning the Natural Resource Investment War
Source: The Energy Report Staff (12/29/2015)

Energy investors are no strangers to boom-and-bust cycles. In fact, a number of the experts interviewed by The Energy Report in 2015 took a certain amount of glee in the opportunities they knew would open up in low-price markets for oil and gas, uranium and lithium.

Three Upstream MLPs with the Discipline to Succeed in the Coming Recovery: RBC Analyst John Ragozzino
Source: JT Long of The Energy Report (04/29/2015)

RBC's John Ragozzino is anticipating an oil price recovery that could bode well for upstream master limited partnerships, and knows which had the strength to hedge at the right times and which are liquid enough to take advantage of growth opportunities that could be right around the corner.