VPs Debate, Gas Inflates, MLPs Deflate. . .Distributions to Disinflate?

Source: Hinds Howard, MLP HINDSight (10/14/12)

"In the absence of news, commodity prices drove the bus, which helped MLPs outperform the S&P 500 for the week."

MLPs did ok this week on very little company-specific news, aside from several distribution announcements that mostly fell inline of expectations. Energy didn't even get warrant much discussion during the VP debate this week, which I guess is a good thing. In the absence of news, commodity prices drove the bus, which helped MLPs outperform the S&P 500 for the week, while both were down.

This week's winning trade was to be long coal MLPs. All 3 of the operating coal MLPs were up this week. Below is a five year chart with Central App coal spot price (Big Sandy) in blue, Henry Hub natural gas spot price in yellow and Illinois Basin coal spot price in green. It shows how closely Central App coal market has been tied to natural gas historically.

The operating coal MLPs have operations that are scattered around, with not much concentration in Central App, but Central App is widely followed because of its use as a price point for exports. ARLP makes most of its money in Illinois Basin, RNO had idled much of its Central App operations for several months this year, OXF operates in Northern App and the Illinois Basin.

The next chart is the 1 year look at the same three spot price indexes. Central App coal and natural gas have both rallied pretty hard since late June, but remain below levels from a year ago and long term average prices, while Illinois Basin coal looks pretty low and stagnant since the end of April.

Natural gas price strength of late is at least partially the result of the rig count situation of around 5x the number of oil rigs vs gas rigs. Laying down natural gas rigs may finally be making a difference. If those rigs come back online too quick or if we have another warm winter, it could derail natural gas prices from their recovery track. But for now, natural gas above $3.00/mmbtu consistently is welcome.

Source: Bentek and Rigdata

MLP earnings season starts again this Wednesday with KMP's earnings release. It will be interesting to hear from MLP management teams on the level of activity they are seeing in various operating areas, to hear updates on growth projects. Last quarter, the NGL-focused players shocked the sector with much lower distribution coverage on lower NGL margins. It will be interesting to see if WPZ, NGLS and MWE in particular had better 3rd quarters than 2nd quarters.

News of the (MLP) World

It was a light transaction week, with LNCO's IPO the most talked about bit of news. LNCO traded up on its first day 4.8% and was an all around success. It will be very interesting to see if any other MLPs try the same strategy.

Equity

LNCO priced initial public offering of 30.25mm common shares at $36.50/share (8.8% discount to LINE units), raising $1.1bn in gross proceeds
KMI disclosed that certain selling shareholders priced public offering of 69.3 million Class P common shares at $34.15, for gross sales proceeds of $2.4bn

Debt

WES priced additional $150mm of 4.0% senior notes due 2022 at 105.2%, a YTM of 3.356% (press release)
EROC announced 17% increase in its upstream borrowing base (press release)

Corporate Actions

GEL announced exit of Quintana Capital Group from ownership of its L.P. units (press release)

4 Quintna board members resigned as a result of the sale
The Davison family stepped up its ownership stake to more than 17%
CEO Grant Sims bought $6.5mm worth of units

Delaware Court dismissed lawsuit brought by HITE Hedge LP against El Paso Corp (now owned by KMI), citing lack of fiduciary responsibility of GP to LP with regards to drop down sales to EPB (judge's opinion)
Quarterly per unit distribution / dividend announcements:

TRGP: $0.4225, +7.3% quarter over quarter
WES: $0.50, +4.2% qoq
NGLS: $0.6625, +3.1% qoq
KMI: $0.36, +2.9% qoq
GEL: $0.4725, +2.7% qoq
EPD: $0.65, +2.4% qoq
CPNO: $0.575, flat
TGP: $0.675, flat
TOO: $0.5125, flat

200 Posts

This is my 200th post, by the way. At a conservatively estimated average of around 750 words per post, we are talking about 150,000 words about MLPs (mostly) in less than 3 years. That's roughly the equivalent of a 300 page book. Time well spent, I think. These posts have raised my credibility and profile, connected me with my new employer and a few new clients, forced me to keep up with MLP news religiously and (most importantly) helped me be a better investor. Thanks to all of you readers, old and new.

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.