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What is CFFO? (Cash Flow from Operations, as displayed in Unit Metrics tab)
Cash Flow from operations or operating activities (CFFO or CFO) is helpful to understanding the amount of cash a MLP generates from the revenues it brings in from regular business activities.
The calculation is cash generated fro
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It has been noted that DCF calculations can vary materially among MLPs, so it appears difficult to compare MLPs by DCF and related measures. How can we compare firms to get reliable comparison of DCF, DCF growth, DCF per share, etc that are needed to compare and value MLPs?
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Please explain coverage ratio for Distributable Cash Flow?
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On the MLPData Quote screen, what does the "E" displayed next to "Annualized Distribution" and "Annualized Dist. Yield" fields indicate?
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Insights
Insights-
Jun 20, 2018
US Shale Production As of 6/19/18
Monthly EIA Oil Production data as of June 19th 2108: The Below table illustrates the Year over Year increase over the previous June. Total Shale production overall has increased 2,317,000 bpd since the low reached in September 2016, a 51% increase
Monthly EIA Oil Production data as of June 19th 2108: The Below table illustrates the Year over Year increase over the previous June. Total Shale production overall has increased 2,317,000 bpd since the low reached in September 2016, a 51% increase
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Mar 18, 2018
US Shale Production As of 03/12/18
Monthly EIA Oil Production data as of February 12 2108: The Below table illustrates the increase over the previous April. Total Shale production overall has increased 1,924,000 bpd since the low reached in September 2016, a 44% increase
Monthly EIA Oil Production data as of February 12 2108: The Below table illustrates the increase over the previous April. Total Shale production overall has increased 1,924,000 bpd since the low reached in September 2016, a 44% increase
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Feb 13, 2018
US Shale Production As of 02/12/18
Monthly EIA Oil Production data as of February 12 2108: The Below table illustrates the increase over the previous March. Total Shale production overall has increased 1,794,000 bpd since the low reached in September 2016, a 40% increase
Monthly EIA Oil Production data as of February 12 2108: The Below table illustrates the increase over the previous March. Total Shale production overall has increased 1,794,000 bpd since the low reached in September 2016, a 40% increase
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Jan 16, 2018
US Shale Production As of 01/16/18
Monthly EIA Oil Production data as of January 16th 2108: The Below table illustrates the increase over the previous February. Total Shale production overall has increased 1,559,000 bpd since the low reached in September 2016, a 36% increase
Monthly EIA Oil Production data as of January 16th 2108: The Below table illustrates the increase over the previous February. Total Shale production overall has increased 1,559,000 bpd since the low reached in September 2016, a 36% increase
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Dec 18, 2017
US Shale Production As of 12/18/17
Monthly EIA Oil Production data as of December 18 2107: The Below table illustrates the increase over the previous January. Total Shale production overall has increased 1,451,000 bpd since the low reached in September 2016, a 32% increase
Monthly EIA Oil Production data as of December 18 2107: The Below table illustrates the increase over the previous January. Total Shale production overall has increased 1,451,000 bpd since the low reached in September 2016, a 32% increase
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Nov 25, 2017
MLP Fund Concentrations As of 10/31/17
Paying close attention to MLP Fund rotations and concentrations can provide investors with insights into how institutional managers view the risk reward relationships for various units. MLPData tracks the weekly fund flows and the latest monthly top ten positions as reported by the funds, in order to identify relative changes in sentiment. As of 1…
Paying close attention to MLP Fund rotations and concentrations can provide investors with insights into how institutional managers view the risk reward relationships for various units. MLPData tracks the weekly fund flows and the latest monthly top ten positions as reported by the funds, in order to identify relative changes in sentiment. As of 10/31/17, the below grid displays the top 10 holdings across the largest actively managed funds along with total AUM
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Oct 21, 2017
IPO Preview: BP Midstream Partners
As the Master Limited Partnership circle of life continues to swirl (HEP just announced IDR Conversion this week), another large cap MLP IPO will offer investors access to a financially engineered, high distribution growth, sponsor drop down tax deferred income vehicle. Unlike other units which are generally impacted by organic volumes and excess…
As the Master Limited Partnership circle of life continues to swirl (HEP just announced IDR Conversion this week), another large cap MLP IPO will offer investors access to a financially engineered, high distribution growth, sponsor drop down tax deferred income vehicle. Unlike other units which are generally impacted by organic volumes and excessive midstream infrastructure, BP Midstream Partners success (yield + distribution growth = total return) will be mostly predicated upon access to the capital markets to fund Sponsor drop downs. BP Midstream Partners is expected to price on 10/26/17 between $19 and $21 with a midpoint yield of 5.25%, for which 80% of the $1.05 distribution will be tax deferred until at least 12/31/2020 according to their filing. Pro forma distributable cash flow coverage is projected to be 1.18x. The Sponsor, BP PLC, is expected to receive $804MM in proceeds for the interests related to the Gulf of Mexico and Whiting Refinery midstream assets they are dropping into the MLP as described below: In addition to the high 15x Adjusted EBITDA, unitholders will pay for the assets to be owned by the MLP (vs the 8x EBITDA multiple of the C-Corp Sponsor BP), the GP will also receive Incentive Distribution Right Payments, which will commence when the Minimum Quarterly Distribution Rate ($1.05 annual/$0.2625 quarterly) increases by at least 15% and will payout as per the table below. BP Midstream will be following the path of other large Integrated Sponsors which launched MLPs between mid 2013 and late 2014. At the time, best in class distributions of 25-30% was used to describe their growth plans, which have been dialed back as of late. The below table summarizes their most recent metrics, which are all trading well below BP Midstream's midpoint yield of 5.25%, indicating units have upside to $24.00 for parity.
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Sep 03, 2017
MLP Fund Concentrations As of 8/31/17
Paying close attention to MLP Fund rotations and concentrations can provide investors with insights into how institutional managers view the risk reward relationships for various units. MLPData tracks the weekly fund flows and the latest monthly top ten positions as reported by the funds, in order to identify relative changes in sentiment. As of 8…
Paying close attention to MLP Fund rotations and concentrations can provide investors with insights into how institutional managers view the risk reward relationships for various units. MLPData tracks the weekly fund flows and the latest monthly top ten positions as reported by the funds, in order to identify relative changes in sentiment. As of 8/31/17, the below grid displays the top 10 holdings across the largest actively managed funds along with total AUM and 2017 YTD Performance
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Jul 19, 2017
US Shale Production As Of July 2017
Monthly EIA Oil Production data as of July 17, 2107: The Below table illustrates the 22.61% increase over the previous August. Total Shale production overall has increased 1,115,000 bpd since the low reached in September 2016
Monthly EIA Oil Production data as of July 17, 2107: The Below table illustrates the 22.61% increase over the previous August. Total Shale production overall has increased 1,115,000 bpd since the low reached in September 2016
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Jun 21, 2017
MLP Fund Concentrations As of 6/15/17
Paying close attention to MLP Fund rotations and concentrations can provide investors with insights into how institutional managers view the risk reward relationships for various units. MLPData tracks the weekly fund flows and the latest monthly top ten positions as reported by the funds, in order to identify relative changes in sentiment. As of 6…
Paying close attention to MLP Fund rotations and concentrations can provide investors with insights into how institutional managers view the risk reward relationships for various units. MLPData tracks the weekly fund flows and the latest monthly top ten positions as reported by the funds, in order to identify relative changes in sentiment. As of 6/15/17, the below grid displays the top 10 holdings across the largest actively managed funds along with total AUM and 2017 YTD Performance
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Mar 28, 2017
IPO Preview: Hess Midstream Partners
Hess Midstream Partners LP, originally filed for IPO in September 2014, will price next week between $19-$21 with a midpoint yield of 6.00% ($1.20) and expected 2018 Distributable Cash Flow Coverage of 1.15x. Through 2020, less than 20% of the distributions will be subject to federal tax. Units are expected to begin trading on Wednesday (4/5/17),…
Hess Midstream Partners LP, originally filed for IPO in September 2014, will price next week between $19-$21 with a midpoint yield of 6.00% ($1.20) and expected 2018 Distributable Cash Flow Coverage of 1.15x. Through 2020, less than 20% of the distributions will be subject to federal tax. Units are expected to begin trading on Wednesday (4/5/17), raising $232MM from the 22.5% sale of Sponsor's Global Infrastructure Partners (GIP) and Hess interests, with a market cap of $1.3B. The Sponsor, Hess Infrastructure Partners (HIP), was formed in 2015 when Hess contributed Bakken midstream assets to HIP and GIP purchased a 50% ownership interest for $2.675B, valuing the assets at $5.35B. Since forming HIP, Bakken crude production has fallen nearly 20%, with the expectation that production will increase from higher energy prices and Hess's 2017 plan to spend $700MM in the Bakken, which includes increasing their rig count from 2 to 6, expected to result in 75 new wells by year end. Monthly Crude Production - EIA Monthly Natural Gas Production - EIA The MLP will own interests in several assets which derive the majority of the cash flows from gathering, compressing, and processing natural gas and fractionating natural gas liquids. Remaining cash flows will consist of crude rail transport, terminaling and storage services, which will account for 10% of adjusted EBITDA. The assets have 10 year fee based MVC agreements with Hess, set to expire in 2024, with a 10 year renewal term. The Tioga Gas Plant is expected to have a turnaround in 2019, resulting in a lower Minimum Volume Commitment as indicated below Fee Based Agreements Segment EBITDA Contributions Incentive Distribution Right payments will reach the first tier after Hess Midstream Partner's increases their Minimum Quarterly Distribution (MQD) by 15% from $0.30 to $0.345 and will reach the top tier payout when the distribution rate exceed $0.45, a 50% increase from the MQD. Growth will be achieved by dropping down the remaining HIP interests, which after the IPO, will generate a remaining ~ $250MM of Adjusted EBITDA, with a book value or $2.4B. Hess also expects to organically add new midstream services and expand third party relationships. Hess Midstream Partners follows the November 2016 IPO of Noble Midstream Partners, which is up 100.43% from their IPO, on expectations of increasing production in the DJ Basin. While Hess's Bakken production is more sensitive to lower energy prices due to limited midstream infrastructure and higher operating expense, a modest move up in crude prices could accelerate production and offer significant upside to unitholders. Hess Midstream SEC Filing Can Be Accessed Here
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Mar 25, 2017
MLP Fund Concentrations As of 2/28/17
Paying close attention to MLP Fund rotations and concentrations can provide investors with insights into how institutional managers view the risk reward relationships for various units. MLPData tracks the weekly fund flows and the latest monthly top ten positions as reported by the funds, in order to identify relative changes in sentiment. As of 2…
Paying close attention to MLP Fund rotations and concentrations can provide investors with insights into how institutional managers view the risk reward relationships for various units. MLPData tracks the weekly fund flows and the latest monthly top ten positions as reported by the funds, in order to identify relative changes in sentiment. As of 2/28/17, the below grid displays the top 10 holdings across the largest actively managed funds along with total AUM and 2017 YTD Performance
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Mar 17, 2017
EIA Production As of March 2017
Monthly EIA Oil Production data as of March 13, 2107: The Below table illustrates the 0.24% Year over Year increase in Shale production, with Permian production up 12.28%, offsetting continued declines in the Bakken and Eagle Ford from the previous April. Total Shale production overall has increased 500,000 bpd since the low reached in September…
Monthly EIA Oil Production data as of March 13, 2107: The Below table illustrates the 0.24% Year over Year increase in Shale production, with Permian production up 12.28%, offsetting continued declines in the Bakken and Eagle Ford from the previous April. Total Shale production overall has increased 500,000 bpd since the low reached in September 2016 Gas Production
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Mar 03, 2017
MLP Short Interest As of 2/15/17
The Benchmark index increased 2.4% between January 31st and February 15th during which time the total number of short shares increased from 323MM to 332MM. Below are the units with the greatest change in short sales from February 15th
The Benchmark index increased 2.4% between January 31st and February 15th during which time the total number of short shares increased from 323MM to 332MM. Below are the units with the greatest change in short sales from February 15th
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Feb 12, 2017
MLP Weekly: Management Comments
Fourth Quarter earning calls continued to reveal the lag between drilling expansion and midstream volumes and margins, although the outlook remains very positive for certain MLP assets. Permian assets should benefit in late 2017, if crude remains stable, while many western assets face fierce competition from excess capacity and falling production.…
Fourth Quarter earning calls continued to reveal the lag between drilling expansion and midstream volumes and margins, although the outlook remains very positive for certain MLP assets. Permian assets should benefit in late 2017, if crude remains stable, while many western assets face fierce competition from excess capacity and falling production. Construction began on the final leg of the Dakota Access Pipeline after the US Army of Engineers completed their review and granted the final easement necessary to connect the pipeline underneath Lake Oahe. Unit News Tesoro agreed to waive $10MM of IDR payments from Tesoro Partners over 2017 and 2018, which total $138MM in 2016 MPLX and Antero Midstream announced a JV which will expand processing infrastructure at its Sherwood Complex in Doddridge County, West Virginia. The Sherwood Complex began operations in October 2012 and has grown to become the single largest gas processing complex in the Northeast, currently with six cryogenic processing facilities totaling 1.2 billion cubic feet per day of capacity. MarkWest will initially contribute existing assets to the joint venture consisting of the three processing facilities currently under construction at the Sherwood Complex, as well as associated infrastructure related to the operation of these facilities. Antero Midstream will initially contribute approximately $155 million for its allocated share of processing assets at the Sherwood Complex and ownership of fractionation capacity at the Hopedale Complex. Antero Midstream will release to the Joint Venture its right to provide processing services on 195,000 gross acres held by Antero Resources in Ritchie, Tyler, and Wetzel Counties in West Virginia, expanding the dedicated acreage to 360,000. .Going forward, it is expected that MarkWest and Antero Midstream will each contribute 50 percent of the future capital investments (expected to be $1.6B) for the joint venture. Antero Midstream sold 5MM new units to finance the transaction. Western Gas and Williams Partners announced an asset swap where Western will acquire the remaining 50% non operating interest in the Delaware Basin JV Gathering LLC in exchange for their 33.75% non operating interest in the Rome and Liberty Marcellus based natural gas gathering systems plus $155 in cash. In addition, Williams Partners has entered into a separate agreement with Anadarko Petroleum Corporation to sell Williams Partners’ 33.33 percent interest in the Ranch Westex gas processing plant in the Delaware Basin for $45 million in cash. Energy Transfer Equity filed to sell $1B of new units Earnings Call Comments NGL Energy Partner's Opening Comments prior to reporting results on the low end of Guidance "The sector has emerged from the recent challenges and there are significant upside to our business. Obsessing over a quarter's numbers rather than the next three to four years' projected EBITDA just doesn't make any sense." On Eagle Ford Volumes "We see signs of improvement in the Eagle Ford as well with an expectation that drilling activity will increase as we inch closer to $60 crude prices." Plains All American on Drilling Lag "As we discussed recently, drilling activities have picked up and there're other very encouraging signs on horizon. But I would note there will be a time delay before our transportation volumes and gathering margins will reflect the benefits of this increased activity. And we anticipate the first six to nine months of 2017 will be challenging" On Logistics Margins "We just seen a intense amount of competition. We've probably given 65%, 70% plus of the margin just because of competition out there" "I don't think there's going to be a large opportunity again for its existing capacity. I think most everybody has tweaked the capacity increases that are available. We think second half of next year of 2017 you could start seeing enough crude. We think by second half of the year, we should start seeing more of a balance between the MVCs and the crude available for, basically for the market." On a Border Adjustment Tax with Mexico "We think it will have the biggest impact on obviously and these are refiners unless there is an exclusion there, how it affects them will create both opportunities and headaches for mid-stream. But we get paid to move barrels. And whether it's an imported barrel or a domestically produced barrel, I think we’re indifferent Buckeye Partners Comments On Border Adjustment Tax "I think a lot needs to take shape before anyone can really give you a precise answer on that. But I think with the work that we’ve done looking at our asset base in our business, I think in the long term it is probably a fairly marginal impact net-net on the business." On Trafigura's Splitter Termination with Magellan Midstream "we are aligned. We have a great relationship with Trafigura, they are a 20% owner in our South Texas hub and we have worked really well with them and continue to work well with them." Q4 Distributions Announced This Week Fund Flows Mutual Fund flows have remained steady the last several weeks as total flows near $6B over the past twelve months Questions, Comments or Suggestions? Please Contact Us Here
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Feb 03, 2017
MLP Short interest As of 1/15/17
The Benchmark index increased 1.0% between December 30th and January 15th during which time the total number of short shares decreased from 315MM to 309MM. Below are the units with the greatest change in short sales from December 30th
The Benchmark index increased 1.0% between December 30th and January 15th during which time the total number of short shares decreased from 315MM to 309MM. Below are the units with the greatest change in short sales from December 30th
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Jan 28, 2017
MLP Fund Concentrations: 12/31/16
Paying close attention to MLP Fund rotations and concentrations can provide investors with insights into how institutional managers view the risk reward relationships for various units. MLPData tracks the weekly fund flows and the latest monthly top ten positions as reported by the funds, in order to identify relative changes in sentiment. As o…
Paying close attention to MLP Fund rotations and concentrations can provide investors with insights into how institutional managers view the risk reward relationships for various units. MLPData tracks the weekly fund flows and the latest monthly top ten positions as reported by the funds, in order to identify relative changes in sentiment. As of 12/31/16, the below grid displays the top 10 holdings across the largest actively managed funds along with total AUM and 2017 YTD Performance
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Jan 24, 2017
IPO Preview Kimbell Production Partners
A new Mineral Rights Master Limited Partnership is expected to price next week to ride the wave of higher crude and increasing Permian activity. Kimbell Royalty Partners is a variable distribution MLP which owns mineral rights across 3.7MM gross acres, which produced 3,317 boe/pd in the first six months of 2016. About 44% of the acreage is located…
A new Mineral Rights Master Limited Partnership is expected to price next week to ride the wave of higher crude and increasing Permian activity. Kimbell Royalty Partners is a variable distribution MLP which owns mineral rights across 3.7MM gross acres, which produced 3,317 boe/pd in the first six months of 2016. About 44% of the acreage is located in the Permian, and 52.6% of the total production, for the same period, was originated from the Permian, Eagle Ford, Terryville and Bakken basins. In 2015, 63% of revenues were derived from oil sales, 30% from natural gas, and 7% from natural gas liquids The Partnership will not have any subordinated units or Incentive Distribution Rights, and plans to distribute all operating cash flows, less reserves, on a quarterly basis. No cash will be retained for future acquisitions. The variable distribution policy can result in a quarterly distribution of $0.00. IPO pricing is expected to be $19 -$21 for 5,000,000 units with a forward annualized yield of 7.25% based upon a 2017 pro rated distribution of $1.45. Through 2019, the company expects that 30% or less of the aggregate distributions received will be subject to federal income tax. Kimbell will join three other publicly traded MLPs which own Mineral Rights, Dorchester Minerals LP, Black Stone Minerals LP and Viper Energy Partners, which have delivered differing results based upon their respective distribution policy, during a period of declining production volumes and weak energy prices. With Permian production expected to increase 20% over the next few years, Kimbell Royalty Partners provides investors with a vehicle to benefit from rising cash flows, tempered by limited trading liquidity and wider spreads. More Details can be found here
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Jan 13, 2017
MLP Short Interest As of 12/30/16
The Benchmark index increased 4.7% between December 15th and December 30th during which time the total number of short shares increased from 255MM to 315MM. Below are the units with the greatest change in short sales from December 15th
The Benchmark index increased 4.7% between December 15th and December 30th during which time the total number of short shares increased from 255MM to 315MM. Below are the units with the greatest change in short sales from December 15th
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Dec 28, 2016
MLP Short Interest As of 12/15/16
The Benchmark index was flat between November 30th and December 15th during which time the total number of short shares increased from 251MM to 255MM. Below are the units with the greatest change in short sales from November 30th
The Benchmark index was flat between November 30th and December 15th during which time the total number of short shares increased from 251MM to 255MM. Below are the units with the greatest change in short sales from November 30th
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Dec 25, 2016
MLP Short Interest As of 11/3016
The Benchmark index was flat between November 15th and November 30th during which time the total number of short shares decreased from 254MM to 251MM. Below are the units with the highest short interest shares outstanding
The Benchmark index was flat between November 15th and November 30th during which time the total number of short shares decreased from 254MM to 251MM. Below are the units with the highest short interest shares outstanding
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Dec 02, 2016
MLP Short Interest As of 11/15/16
The Benchmark index gained 1.00% between October 31st and November 15th during which time the total number of short shares decreased from 272MM to 254MM. Below are the units with the highest short interest shares outstanding
The Benchmark index gained 1.00% between October 31st and November 15th during which time the total number of short shares decreased from 272MM to 254MM. Below are the units with the highest short interest shares outstanding
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Dec 01, 2016
MLP Fund Concentrations 10/31/2016
Paying close attention to MLP Fund rotations and concentrations can provide investors with insights into how institutional managers view the risk reward relationships for various units. MLPData tracks the weekly fund flows and the latest monthly top ten positions as reported by the funds, in order to identify relative changes in sentiment. As of 1…
Paying close attention to MLP Fund rotations and concentrations can provide investors with insights into how institutional managers view the risk reward relationships for various units. MLPData tracks the weekly fund flows and the latest monthly top ten positions as reported by the funds, in order to identify relative changes in sentiment. As of 10/31/16, the below grid displays the top 10 holdings across the largest actively managed funds
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Nov 10, 2016
MLP Short Interest As of 10/31/16
The Benchmark index fell -3.30% between October 14th and October 31st, during which time the total number of short shares increased from 270MM to 272MM. Below are the units with the greatest increase over the period
The Benchmark index fell -3.30% between October 14th and October 31st, during which time the total number of short shares increased from 270MM to 272MM. Below are the units with the greatest increase over the period
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Oct 27, 2016
MLP Short Interest As of 10/14
The Benchmark index fell -1.90% between September 30th and October 14th, during which time the total number of short shares declined from 279MM to 278MM. Below are the units with the greatest decrease over the period
The Benchmark index fell -1.90% between September 30th and October 14th, during which time the total number of short shares declined from 279MM to 278MM. Below are the units with the greatest decrease over the period
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Oct 13, 2016
MLP Short interest As of 9/30/16
The Benchmark index gained 5.70% between September 15th and September 30th, during which time the total number of short shares declined from 312.6.1MM to 278.5MM. Below are the units with the greatest decrease over the period
The Benchmark index gained 5.70% between September 15th and September 30th, during which time the total number of short shares declined from 312.6.1MM to 278.5MM. Below are the units with the greatest decrease over the period
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Sep 27, 2016
MLP Short Interest As of 9/15/16
The Benchmark index decreased -3.86% between August 31st and September 15th, during which time the total number of short shares remained flat from 312.1MM to 312.6MM. Below are the units with the greatest increase over the period
The Benchmark index decreased -3.86% between August 31st and September 15th, during which time the total number of short shares remained flat from 312.1MM to 312.6MM. Below are the units with the greatest increase over the period
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Sep 23, 2016
MLP Fund Concentrations August 2016
Paying close attention to MLP Fund rotations and concentrations can provide investors with insights into how institutional managers view the risk reward relationships for various units. MLPData tracks the weekly fund flows and the latest monthly top ten positions as reported by the funds, in order to identify relative changes in sentiment. As of 8…
Paying close attention to MLP Fund rotations and concentrations can provide investors with insights into how institutional managers view the risk reward relationships for various units. MLPData tracks the weekly fund flows and the latest monthly top ten positions as reported by the funds, in order to identify relative changes in sentiment. As of 8/31/16, the below grid displays the top 10 holdings across the largest actively managed funds.
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Sep 13, 2016
MLP Short Interest As of 8/31/16
The Benchmark index decreased -1.90% between August 15th and August 31st, during which time the total number of short shares increased from 311MM to 312MM. Below are the units with the greatest increase over the period
The Benchmark index decreased -1.90% between August 15th and August 31st, during which time the total number of short shares increased from 311MM to 312MM. Below are the units with the greatest increase over the period
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Sep 08, 2016
IPO Preview: Noble Midstream is Back
Ten months have elapsed since the last time Noble Midstream looked to launch their IPO, this time around the company expects to price at a midpoint yield of 7.5% vs the 6.25% from the previous attempt last November. Sponsor Noble Energy is one of the largest liquids producers in the DJ Basin, which started production in 2013 and has since grown vol…
Ten months have elapsed since the last time Noble Midstream looked to launch their IPO, this time around the company expects to price at a midpoint yield of 7.5% vs the 6.25% from the previous attempt last November. Sponsor Noble Energy is one of the largest liquids producers in the DJ Basin, which started production in 2013 and has since grown volumes an average of 16%. Noble Midstream's only client is Noble Energy, which has escalating fixed fee dedicated acreage agreements, but no minimum volume commitments. Here are a few of the changes from the previous prospectus and an update to our article published in November 2015 Issuance: 12.500,000 units with a Minimum Quarterly Distribution of $1.50 and midpoint yield of 7.50% at a $20 offering price vs 6.25% in previous offering Incentive Distribution Rights trigger the first tier when the distribution exceeds $0.4313 and reaches the 50% split when the distribution exceeds $0.5625, a 50% increase over the minimum quarterly distribution of $0.375 Assets
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Aug 26, 2016
MLP Short Interest As of 8/15/2016
The Benchmark index decreased .015% between July 30th and August 15th, during which time the total number of short shares decreased from 322MM to 315MM. Below are the units with the greatest decrease over the period along with their market performance over the same period Below is the performance chart for the units with the greatest d…
The Benchmark index decreased .015% between July 30th and August 15th, during which time the total number of short shares decreased from 322MM to 315MM. Below are the units with the greatest decrease over the period along with their market performance over the same period Below is the performance chart for the units with the greatest decrease in short shares outstanding plotted for the reporting period of July 30th to August 15th
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Aug 10, 2016
MLP Short Interest As of 7/30/16
The Benchmark index decreased -1.2% between July 15th and July 30th, during which time the total number of short shares decreased from 329MM to 322MM. Below are the units with the greatest decrease over the period along with their market performance over the same period Below is the performance chart for the top 3 units with the greate…
The Benchmark index decreased -1.2% between July 15th and July 30th, during which time the total number of short shares decreased from 329MM to 322MM. Below are the units with the greatest decrease over the period along with their market performance over the same period Below is the performance chart for the top 3 units with the greatest decline
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Jul 27, 2016
MLP Short Interest As of 7/15/16
The Benchmark index increased 1.00% between June 30th and July 15th, during which time the total number of short shares increased from 321MM to 325MM. Below are the units with the greatest increase over the period along with their market performance over the same period
The Benchmark index increased 1.00% between June 30th and July 15th, during which time the total number of short shares increased from 321MM to 325MM. Below are the units with the greatest increase over the period along with their market performance over the same period
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Jul 15, 2016
MLP Credit Yields As of 7/15/16
MLP bond yields have been tightening over the past 4 weeks despite a fundamental outlook which still projects declining volumes and weaker energy prices. During this same period, sentiment has improved as a result of equity issuance, healthy asset sale multiples, and a focus on balance sheet improvement at the potential cost of distribution mainte…
MLP bond yields have been tightening over the past 4 weeks despite a fundamental outlook which still projects declining volumes and weaker energy prices. During this same period, sentiment has improved as a result of equity issuance, healthy asset sale multiples, and a focus on balance sheet improvement at the potential cost of distribution maintenance and growth.
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Jul 13, 2016
MLP Short Interest As of 6/30/16
The Benchmark index increased 4.20% between June 15th and June 30th, during which time the total number of short shares decreased from 340MM to 322MM. Below are the units with the greatest decrease over the period along with their market performance over the same period Below is the performance chart for the units with the greatest dec…
The Benchmark index increased 4.20% between June 15th and June 30th, during which time the total number of short shares decreased from 340MM to 322MM. Below are the units with the greatest decrease over the period along with their market performance over the same period Below is the performance chart for the units with the greatest declines in short interest between 6/15 and 6/30
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Jun 25, 2016
MLP Credit Yields As of 6/24/16
Midstream credit yields have been tightening in stride with the rise of crude over the past six weeks. In some names, the credit and distribution yields are near parity
Midstream credit yields have been tightening in stride with the rise of crude over the past six weeks. In some names, the credit and distribution yields are near parity
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Jun 25, 2016
MLP Short Interest As of 6/15/16
The Benchmark index increased 1.08% between May 31st and June 15th, during which time the total number of short shares increased from 337MM to 334MM. Below are the units with the greatest increase over the period along with their market performance over the same period
The Benchmark index increased 1.08% between May 31st and June 15th, during which time the total number of short shares increased from 337MM to 334MM. Below are the units with the greatest increase over the period along with their market performance over the same period
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Jun 24, 2016
Judge Allows Energy Transfer to Terminate Merger
After the close on Brexit Friday, Judge Glasscock affirmed what Kelcy Warren warned shareholders on their recent conference call, which is that there is no Merger to approve, enabling Energy Transfer to walk away from their merger with Williams Inc with no penalty. The market was correct to focus on the Judge’s comments about whether Latham &…
After the close on Brexit Friday, Judge Glasscock affirmed what Kelcy Warren warned shareholders on their recent conference call, which is that there is no Merger to approve, enabling Energy Transfer to walk away from their merger with Williams Inc with no penalty. The market was correct to focus on the Judge’s comments about whether Latham & Watkins acted in good faith when notifying Energy Transfer and Williams that it could not affirm a favorable 721(a) ruling to allow the transaction to be treated by tax authorities as a tax-free exchange, an agreed upon condition of the merger. In the Judge’s opinion, he mentioned that he was skeptical of Energy Transfer’s motivations, but opted to focus on the L&W intent in deciding whether the merger could proceed. Judge Glasscock concluded that Williams had failed to prove that Energy Transfer had materially breached its contractual obligation to undertake commercially reasonable efforts to receive the 721 tax opinion from Latham, and as such, Energy Transfer is entitled to terminate the Merger Agreement. The most critical events occurred between March 29th and April 16th, during which time Energy Transfer’s Tax Chief and Latham realized that the precipitous drop in ETE units would make the proposed exchange taxable and prevent Latham from offering the 721 non-taxable opinion. The activity during that period aligns with a considerable move higher in ETE units,, and a widening spread to WMB shares, as illustrated below The Judge noted that both parties agreed to empower Latham, rather than an independent third party, to provide the 721 opinion, noting that is was against Latham’s reputational interests to first provide a “should” opinion, only to backtrack due to market conditions not contemplated in their initial analysis. “In fact, it is a substantial embarrassment to Latham and it’s tax partners”, the Judge noted in his conclusion Also noteworthy is the how the Williams Board approved the merger. On September 24th, 2015 the board took an informal vote on the Merger which resulted in a 6-7 vote Against. The board then went to dinner, and the next morning, a new vote resulted in a 8-5 Affirmation of the merger. Williams in now in the unenviable position of following through with their dividend cut and re-establishing the investment case for William shares, which highlighted many risks in their FOR recommendation, for a vote that at the moment has no binding implications. Through a press release issued after the Court's ruling, Williams still encouraged shareholders to vote FOR at the June 27th special meeting, the day prior to the Merger date. Williams plans to take "appropriate actions" to enforce their rights under the Merger Agreement. At the moment, it is unclear the status of WMB shares which have been pledged through the Election Form, which Williams previously stated could not be traded prior to the effective date of the Merger.
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Jun 15, 2016
MLP Fund Concentrations June 2016
Paying close attention to MLP Fund rotations and concentrations can provide investors with insights into how institutional managers view the risk reward relationships for various units. MLPData tracks the weekly fund flows and the latest monthly top ten positions as reported by the funds, in order to identify relative changes in sentiment. As of 6…
Paying close attention to MLP Fund rotations and concentrations can provide investors with insights into how institutional managers view the risk reward relationships for various units. MLPData tracks the weekly fund flows and the latest monthly top ten positions as reported by the funds, in order to identify relative changes in sentiment. As of 6/14/16, the below grid displays the top 10 holdings across the largest actively managed funds.
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Jun 11, 2016
MLP Short Interest As of 5/31/16
The Benchmark index increased 3.4% between May13th and May 31st, during which the total number of short shares decreased from 353MM to 338MM over the same period. Below are units with the highest level of short interest as of May 31st
The Benchmark index increased 3.4% between May13th and May 31st, during which the total number of short shares decreased from 353MM to 338MM over the same period. Below are units with the highest level of short interest as of May 31st
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Jun 10, 2016
Bankruptcy Watch: 6/10/16
As banks complete their Spring re-determination, the process where banks calibrate their credit levels for producers, the squeeze of 10-30% reductions are being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. This week…
As banks complete their Spring re-determination, the process where banks calibrate their credit levels for producers, the squeeze of 10-30% reductions are being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. This week the following companies have announced, or indicated, they are pursuing some form of restructuring Hercules offshore filed Chapter 11 on Monday in order to liquidate the assets of the company Midstream Agreements: None Seventy Seven Energy Inc. filed for Chapter 11 protection in Delaware Tuesday with a prepackaged plan that aims to shed roughly $1.1 billion in debt by handing over equity to lender Midstream Agreements: None
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Jun 03, 2016
MLP Bankruptcy Watch: 6/3/16
As banks complete their Spring re-determination, the process where banks calibrate their credit levels for producers, the squeeze of 10-30% reductions are being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. This week…
As banks complete their Spring re-determination, the process where banks calibrate their credit levels for producers, the squeeze of 10-30% reductions are being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. This week the following companies have announced, or indicated, they are pursuing some form of restructuring: Warren Resources, an E&P producer with operating assets in California and Pennsylvania, filed for Chapter 11 in order to seek a restructuring of their $545MM Debt. Midstream Agreements: The Chapter 11 filing did not include any midstream trade debt credits and in their most recent 10k, the company disclosed that all of their California production is sold to the Phillips 66 Refinery in Carson, CA
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May 27, 2016
MLP Short Interest as of 5/13/16
The Benchmark index declined 2.35% between April 29th and May 13th, during which the total number of short shares decreased from 404MM to 383MM over the period. Below are the top increases and decreases in short sales since April 29th DECREASES INCREASES
The Benchmark index declined 2.35% between April 29th and May 13th, during which the total number of short shares decreased from 404MM to 383MM over the period. Below are the top increases and decreases in short sales since April 29th DECREASES INCREASES
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May 20, 2016
Bankruptcy Watch: 5/20/16
As banks complete their Spring re-determination, the process where banks calibrate their credit levels for producers, the squeeze of 10-30% reductions are being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. This week…
As banks complete their Spring re-determination, the process where banks calibrate their credit levels for producers, the squeeze of 10-30% reductions are being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. This week the following companies have announced, or indicated, they are pursuing some form of restructuring: Sandridge Energy, an E&P producer with operating assets in the Mid-Continent, filed for Chapter 11 where the company plans to swap $3.7B of debt for the equity of the restructured company. Midstream Agreements: Below are the midstream providers with outstanding receivables as disclosed in the Chapter 11 filing. Breitburn Energy Partners, an E&P Master Limited Partnership with diversified assets across the Permian and Mid-Continent, filed for Chapter 11 relief as they work with creditors to restructure their $2.8B debt. Breitburn joins Linn Energy as the second MLP to file for Chapter 11. Breitburn Energy Partners are encouraged to sell their units prior to a debt restructuring, which could result in CODI tax liability on the 2016 K-1. Midstream Agreements: Below are the midstream providers with outstanding receivables as disclosed in the Chapter 11 filing.
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May 13, 2016
MLP Short Interest as of 4/29/16
Total Short Interest for the MLPData universe Declined from 411MM to 404MM shares as of April 29th, 2016. Below are the top changes (declines on top, increases bottom) from the previous reporting period of April 15th, 2016
Total Short Interest for the MLPData universe Declined from 411MM to 404MM shares as of April 29th, 2016. Below are the top changes (declines on top, increases bottom) from the previous reporting period of April 15th, 2016
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May 13, 2016
Bankruptcy Watch: 05/13/16
As banks complete their Spring re-determination, the process where banks calibrate their credit levels for producers, the squeeze of 10-30% reductions are being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. This week…
As banks complete their Spring re-determination, the process where banks calibrate their credit levels for producers, the squeeze of 10-30% reductions are being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. This week the following companies have announced, or indicated, they are pursuing some form of restructuring: Penn Virginia Corp, an E&P company with assets primarily based in the Eagle Ford, filed for Chapter 11 relief this past Thursday, which includes an agreement to reduce their $1.6B in debt. The company has entered into MVC agreements which total $63MM over the next 5+ years and expects to maintain production after the restructuring. Midstream Agreements: $17.3MM annually, $12.3MM due to Republic Midstream after the company sold the gathering rights in 2014 for $147MM. Republic is owned by ArcLight, which has invested $400MM to develop the new gathering and pipeline network. ArcLight has provided American Midstream with a 50% option to purchase the asset for $200MM, an unlikely scenario for the time being. LINN Energy filed for Chapter 11 relief to address their $8.3B of debt, marking the first MLP Bankruptcy since the Thanksgiving crude crash. The E&P producer, which in late 2013 acquired Berry Petroleum in an equity deal, announced a plan to swap debt for equity, 90% of which will be owned by debt holders. The filing indicated they will seek approval to continue to allow Linn Energy unitholders to convert their ownership into LinnCo shares, to avoid potential CODI tax obligations related to to the debt restructuring. The current exchange is set to expire on May 23 Midstream Agreements: No Midstream agreements disclosed in 10K, Archrock Partners LP, DCP Midstream have outstanding trade debts Chaparral Exploration, a Mid-continent gas producer with an EOR business, filed for Chapter 11 relief to reduce their debt by $1.2B Midstream Agreements: No Midstream agreements disclosed in most recent 10K, no Trade Debt with midstream providers
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May 06, 2016
MLP Credit Yields as of 5/6/16
Units have traded in a narrower range the last few weeks as we enter the Q1 earnings period. The below table provides yield change from April 22nd to May 6th, along with the unit returns for the month
Units have traded in a narrower range the last few weeks as we enter the Q1 earnings period. The below table provides yield change from April 22nd to May 6th, along with the unit returns for the month
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May 05, 2016
Bankruptcy Watch: 05/5/16
As banks complete their Spring re-determination, the process where banks calibrate their credit levels for producers, the squeeze of 10-30% reductions are being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. This week…
As banks complete their Spring re-determination, the process where banks calibrate their credit levels for producers, the squeeze of 10-30% reductions are being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. This week the following companies have announced, or indicated, they are pursuing some form of restructuring: Midstates Petroleum, an E&P company with operations focused on oilfields in the Mississippian Lime play in Oklahoma and the Anadarko Basin in Texas and Oklahoma filed for Chapter 11 relief on Monday. The company transports their oil production by Truck and has MVC agreements in place for their gas production. Midstream Agreements: None disclosed in 10K; no Midstream companies listed as Trade debtors in Ch 11 filing
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Apr 29, 2016
Bankruptcy Watch: 4/29/16
As banks complete their Spring re-determination, the process where banks calibrate their credit levels for producers, the squeeze of 10-30% reductions are being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. This week…
As banks complete their Spring re-determination, the process where banks calibrate their credit levels for producers, the squeeze of 10-30% reductions are being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. This week the following companies have announced, or indicated, they are pursuing some form of restructuring Ultra Petroleum, the largest Gas producer in Wyoming, disclosed in their 10Q that due to market conditions, "substantial doubt exists that we be able to continue as a going concern" as result of their $3.9B debt. The company also listed a present lawsuit with Tallgrass Development's Rockies Express Pipeline as described below Tallgrass Development (TDev) also disclosed that Ultra has defaulted on their past and future obligations, and the company is seeking to recover $300MM. TDev announced this past week that Talllgrass Energy Partners plans to acquire a 25% interest in REX, which some investors believe has significant contracting exposure from the Rockies region.
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Apr 27, 2016
MLP Short Interest as of 4/15/16
Total Short Interest for the MLPData universe Declined from 443MM to 417MM shares as of April 15th, 2016. Below are the top changes (declines on top, increases bottom) from the previous reporting period of March 31st, 2016
Total Short Interest for the MLPData universe Declined from 443MM to 417MM shares as of April 15th, 2016. Below are the top changes (declines on top, increases bottom) from the previous reporting period of March 31st, 2016
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Apr 22, 2016
Bankruptcy Watch: 4/22/16
As banks complete their Spring re-determination, the process where banks calibrate their credit levels for producers, the squeeze of 10-30% reductions are being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. This week…
As banks complete their Spring re-determination, the process where banks calibrate their credit levels for producers, the squeeze of 10-30% reductions are being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. This week the following companies have announced, or indicated, they are pursuing some form of restructuring: Foresight Energy Partners disclosed that the partnership has entered into a Transaction Support Agreement with creditors to support a proposed debt restructuring. The Partnership previously suspended distributions in December 2015 and was brought public on 6/18/2014. Midstream Agreements: None Peabody Energy, the world's largest private sector coal company, filed for Chapter 11 protection to restructure their $10B of debt. The filing disclosed the following Trade Debts; Kinder Morgan $5.5MM Midstream Agreements: Kinder Morgan terminal services for export. In 2016, the total take or pay commitments for terminal exports is $301MM across the US and Australia Seventy Seven Energy, and oil field services company, announced that they have entered into a Restructuring Support Agreement in advance of a Chapter 11 filing, which will convert $1.1B of debt into a new form of common equity.
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Apr 22, 2016
MLP Credit Yields as of 4/22/16
Units have surged over the past two weeks and midstream credit yields have also compressed as the market continues to use oil pricing as the proxy for MLP risk. The below table provides yield change from April 8th to April 22nd, along with the unit returns for the month
Units have surged over the past two weeks and midstream credit yields have also compressed as the market continues to use oil pricing as the proxy for MLP risk. The below table provides yield change from April 8th to April 22nd, along with the unit returns for the month
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Apr 15, 2016
Bankruptcy Watch: 4/15/16
As banks complete their Spring re-determination, the process where banks calibrate their credit levels for producers, the squeeze of 10-30% reductions are being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. This week…
As banks complete their Spring re-determination, the process where banks calibrate their credit levels for producers, the squeeze of 10-30% reductions are being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. This week the following companies have announced, or indicated, they are pursuing some form of restructuring: Energy XXI filed for Bankruptcy protection after invoking their grace period a few weeks back. The company has pre-negotiated a plan to reduce the majority of their $2.9B debt in exchange for new equity. On June 30th, 2015, the company sold the Grand Isle Gathering System (GIGS) for $245MM toCorEnergy where EXXI would continue to operate their main gathering system, in return for an 11 year triple net lease agreement with CorEnergy, with annual minimum rents averaging $40.5MM for the term. In the Chapter 11 filing, Grand Isle Corridor LP, Exterran LP, and Archrock LP are listed as creditors with undisclosed trade debts with Energy XXI. Midstream Providers: CorEnergy, Exterran LP, Archrock Breitburn Energy Partners announced that it has suspended any further payments on their Perpetual Preferred units as well as a $33.5 million due on their senior notes. During their grace period, the partnership has retained restructuring advisors to explore strategic alternatives. The Partnership terminated their common unit distributions in August 2015. Plains Marketing accounted for 12% of Breitburn's $1.1B of revenue in 2015. Midstream Providers: None disclosed in 10k Goodrich Petroleum disclosed that they have filed for Chapter 11 in a pre-packaged deal where creditors have agreed to eliminate $400MM in debt. The announcement mentioned that they company expects to pay vendors and suppliers in full under normal terms, before and after the restructuring Midstream Providers: None as disclosed in 10k
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Apr 12, 2016
MLP Short Interest as of 3/31/16
Total Short Interest for the MLPData universe Declined from 470MM to 446MM shares as of March 31st, 2016. Below are the top changes (declines on top, increases bottom) from the previous reporting period of March 15th, 2016
Total Short Interest for the MLPData universe Declined from 470MM to 446MM shares as of March 31st, 2016. Below are the top changes (declines on top, increases bottom) from the previous reporting period of March 15th, 2016
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Apr 08, 2016
MLP Credit Yields as of 4/8/16
The below table provides the yield changes between March 24th and April 8th along with the trailing twelve month coverage ratio, unit yield, and total returns
The below table provides the yield changes between March 24th and April 8th along with the trailing twelve month coverage ratio, unit yield, and total returns
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Apr 07, 2016
Bankruptcy Watch: 4/7/16
As we near the conclusion of the Spring re-determination, the process where banks calibrate their credit levels for producers, the squeeze of 10-30% reductions are being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. …
As we near the conclusion of the Spring re-determination, the process where banks calibrate their credit levels for producers, the squeeze of 10-30% reductions are being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. This week the following companies have announced, or indicated, they are pursuing some form of restructuring: No Reported Restructuring's or Filings Quicksilver Sale to Bluestone Update: After seeking to reject the Crestwood gathering agreement in order to complete their $245MM asset sale, Bluestone and Crestwood announced that they have agreed to a 10 year fixed fee and percent of proceeds gathering agreement for their Barnett shale acreage. The agreements call for all shut in wells to be returned to service by July 2016, and Bluestone will not reduce production through 2018.
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Mar 31, 2016
Bankruptcy Watch: 3/31/16
As we near the conclusion of the Spring re-determination, the process where banks calibrate their credit levels for producers, the squeeze of 10-30% reductions are being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. …
As we near the conclusion of the Spring re-determination, the process where banks calibrate their credit levels for producers, the squeeze of 10-30% reductions are being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. This week the following companies have announced, or indicated, they are pursuing some form of restructuring: Seadrill reportedly has hired advisors to help restructure their $11B of debt. The company operates a fleet of 68 rigs which are contracted under long term commitments. Seadrill Partners LLC, which has purchased a select number of rigs, and their associated long term agreements, will likely have less access to potential asset drop downs, increasing their cash flow risks as existing contracts roll over. Sandridge Energy confirmed that the company has hired advisors to assist in restructuring their $3.6B of debt. The company operates oil and gas producing assets in the Mid-Continent region, and has developed midstream assets to support their drilling and production programs. In January 2016, the company terminated a 30 year MVC treating agreement with Occidental by paying $11M in cash, and transferring all of their producing assets related to the treating agreements. The company had accrued $34.9MM of liability associated with the treating agreements prior to the agreement to terminate. Midstream Exposure: None as disclosed in 2015 10k Black Ridge Oil and Gas, a Bakken and Three Forks focused producer, confirmed that the company has restructured with the senior lender. Midstream Exposure: None as disclosed in 2015 10k Goodrich Petroleum confirmed that they plan to file for bankruptcy in the coming weeks after reaching a restructuring deal with creditors. The company operates assets in the Eagle Ford and Tuscaloosa Marine across 43 fields in eight states spending $4.6MM on transportation and processing. After a sale of the Eagle Ford Trend property, the company does not have minimum volume commitments outstanding Midstream Exposure: None as disclosed in 2015 10k Magnum Hunter, which last week filed a motion to reject their midstream agreements with Eureka Pipeline LCC, was told by the Judge that the company needed to file suit to terminate the agreement, due to the impact on the Chapter 11 filing. The gathering and processing agreement the company is seeking to reject require a minimum fee of $570,000/mo through 2026, representing $68MM in liability. The company previously rejected a midstream agreement with Boardwalk's Texas Gas Transmissions, where the company agreed to terminate in lieu of a $15MM claim made against the estate. Post Rock Energy announced that plan to file Chapter 11 in order to liquidate all of their assets. The company operates oil and gas assets in the Cherokee Basin, where they own and operate 250 wells with nearly 2200 miles of gas gathering lines. Midstream Exposure: None as disclosed in 2015 10Q
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Mar 26, 2016
MLP Short Interest as of 3/15/16
Total Short Interest for the MLPData universe increased from 464MM to 470MM shares as of March 15th, 2016. Over the past 5 weeks, total short interest has increased 12%. Below are the top changes from the previous reporting period of February 29th, 2016 Top Increases Top Decreases
Total Short Interest for the MLPData universe increased from 464MM to 470MM shares as of March 15th, 2016. Over the past 5 weeks, total short interest has increased 12%. Below are the top changes from the previous reporting period of February 29th, 2016 Top Increases Top Decreases
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Mar 26, 2016
MLP Credit Yields as of 3/24/16
Rising Crude has helped some MLP credit rebounds from February as Genesis, Targa and Summit led the Midstream group both in credit and unit appreciation between February 28th and March 24th
Rising Crude has helped some MLP credit rebounds from February as Genesis, Targa and Summit led the Midstream group both in credit and unit appreciation between February 28th and March 24th
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Mar 23, 2016
Bankruptcy Watch: 3/23/16
As we near the spring re-determination date of March 31, 2016, the squeeze is being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. This week the following companies have announced they are pursuing some form of restru…
As we near the spring re-determination date of March 31, 2016, the squeeze is being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. This week the following companies have announced they are pursuing some form of restructuring Southcross Energy: Ticker SXE The parent company, Southcross Holdings LP, which owns the General Partners, units of of Southcross Energy Partners and gas processing assets, announced it has entered into a Restructuring Support Agreement with creditors in advance of a Chapter 11 filing for only the Holding company. Southcross Energy Partners, an MLP which provides natural gas gathering and processing services to acreage in South Texas, Alabama and Mississippi, will continue to operate with interruption. Southcross Energy Partners suspended distributions on January 8th, 2016 and has yet to file their 2016 10k, but did indicate that they will achieve the upper end of their 2016 EBITDA Guidance of $25MM Emerald Oil Ticker: EOX Emerald is an independent exploration and production company focused on Williston, Bakken and Three Forks shale formations. On March 23rd, the company announced they have filed for Chapter 11 and have a non binding offer to purchase essentially all of their assets. As indicated in their September 30th 10Q, the company has MVC agreements for which they realized a $1MM deficiency fee in Q3. Further details of their midstream agreements are described below: Midstream Providers: There were no midstream providers disclosed in their most recent 10k or in the Creditors list in the Ch 11 filing
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Mar 17, 2016
Bankruptcy Watch: 3/17/16
As we near the spring re-determination date of March 31, 2016, the squeeze is being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. This week the following companies have announced they are pursuing some form of restru…
As we near the spring re-determination date of March 31, 2016, the squeeze is being felt as a growing number of producers have delayed their 10k reporting due to pending credit agreement defaults which need to be resolved in order to continue as a going concern. This week the following companies have announced they are pursuing some form of restructuring: New Source Energy LP Ticker: NSLP filed for Chapter 7 Liquidation on Tuesday. This is the first MLP in recent times which failed and resulted in a liquidation Midstream Providers: Blackstone Minerals (BSM), DCP Midstream (DPM) are on the creditor list, but without any further details Linn Energy Ticker: LINE exercised their grace period in regards to their $60MM interest payment due 3/15/16, and is working towards a restructuring. In their 2016 Annual Report, they disclosed the following midstream agreements, three of which are generating deficiency payments due to volumes lower than their MVC commitments. Linn owns the gathering systems for all of their operating acreage. Midstream Providers: Kinder Morgan, Tallgrass Development (Sponsor of Tallgrass Energy Partners) Energy XXI Ticker: EXXI, an oil focused production company with assets focused in South Louisiana and the Gulf of Mexico shelf, announced its intent to exercise its grace period on their interest payment and Notes due on March 15, 2016. On June 30th, 2015, the company sold the Grand Isle Gathering System (GIGS) for $245MM to CorEnergy where EXXI would continue to operate their main gathering system, in return for an 11 year triple net lease agreement with CorEnergy, with annual minimum rents averaging $40.5MM for the term. Midstream Providers: CorEnergy Venoco, an E&P company with Southern California onshore and offshore assets, announced their Ch 11 filing on Friday after their Holly platform suspended operations due to the Plains All American pipeline spill in May 2015. Midstream Provider: Plains All American
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Mar 11, 2016
MLP Short Interest As of 2/29/16
Total Short Interest for the MLPData universe increased from 419MM to 464MM shares as of February 29, 2016. Below are the top changes from the previous reporting period of February 12, 2016
Total Short Interest for the MLPData universe increased from 419MM to 464MM shares as of February 29, 2016. Below are the top changes from the previous reporting period of February 12, 2016
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Mar 09, 2016
Midstream Contracts Rejected in Bankruptcy, How Does this Impact MLPs?
Midstream Master Limited Partnerships should be designed to generate a base level of operating cash flows in return for making infrastructure available to producers. If a midstream company intends to develop new gathering or pipeline systems, they require that producers commit to future use of the infrastructure, ensuring a level of return on the…
Midstream Master Limited Partnerships should be designed to generate a base level of operating cash flows in return for making infrastructure available to producers. If a midstream company intends to develop new gathering or pipeline systems, they require that producers commit to future use of the infrastructure, ensuring a level of return on their investment over a considerable period of time. In the case where a Master Limited Partnership acquires existing assets from either a Sponsor, via dropdown, or by way of a market purchase, the assets are purchased assuming a base level of cash flows. Without the cash flows, the EBITDA multiple on such acquisitions would be significantly lower than those which have occurred over the past 5 years. Prior to the crude crash, the industry has coined and marketed these base cash flows as Fixed Fee, Take or Pay, and Minimum Volume commitments, suggesting that they are low risk cash flows. Over the past year, MLP investors have learned that these contracts are not as "guaranteed" as often suggested, but to date have not regarded these agreements as easily terminated. MLP management teams have been adamant about the staying power of these agreements, if a producer were to enter bankruptcy. During the Q4 earnings calls, most MLPs outlined their counter party exposure to risky producers, but assumed that all of the revenue would not be at risk if they all petitioned for bankruptcy. However, there are two cases winding their way through the court system which may impact these base line cash flows assumptions, specifically related to the obligations of the producer if they declare bankruptcy, and either operate or sell the assets thereafter. Earlier this year on July 15th, Sabine Oil and Gas filed a petition for relief under Chapter 11 and in doing so, filed a motion to reject the 10 year dedicated acreage gas and condensate gathering contracts, governed by Texas law, in place with Nordheim Eagle Ford Gathering LLC, a subsidiary of Cheniere Energy . Sabine also petitioned to reject their Production Gathering, Treating and Processing agreement with HPIP as well as a Water and Acid Handling agreement in place since May 2014. The Debtors argued that the company is no longer able to produce the necessary volumes required by the agreements, and the deficiency payments would impose a considerable and unnecessary drain on resources, indicating that new gathering agreements could be contracted at much lower rates. Through September 2015, Sabine paid $2.7MM in deficiency payments related to their gathering agreements, on roughly $26MM of total gathering fees recording through the same period. HPIP and Nordheim argued that the gathering agreements run with the land, and are not subject to rejection On Tuesday, Judge Chapman ruled that the midstream contracts could be rejected on the basis that the Debtors did not reject the contracts out of bad faith, whim, or caprice, meaning there would be no obligations of future payments. The Judge did not determine that the gathering agreements do not run with the land per se, but suggested that argument was outside the scope of the motion, although the Court did provide a non binding opinion. The second case is related to the proposed sale of acreage from the bankrupt Quicksilver Resources to Bluestone Natural Resources. What is being contested is whether the dedicated gas processing and transportation agreements between Crestwood and Quicksilver can be terminated upon the sale of the acreage, a condition which Bluestone has placed on completing the $245MM transaction. Crestwood's position is that the gathering agreements are connected to the land, regardless of ownership, arguing that they otherwise would not have paid $741MM for the Quicksilver Gas Services pipelines on October 1, 2010. Being the largest producer on the network, Crestwood's position is that the gathering system's value is predicated upon the acreage for which is was developed. Bluestone's position is that the $65MM paid for gathering, processing and transportation through September 30, 2016 is above the prevailing market rates, despite the fact that Quicksilver recorded a $454MM gain when they sold the pipelines to Crestwood, as well as renegotiated the rates up to 65% lower in July 2014. Below are Quicksilver's rates and future volume commitments (excluding compression agreements in place with CSI Compressco as disclosed in their most recent 10k The company previously opted not to pay gathering fees for their Canadian Horn River acreage, which resulted in termination of service prior to any proposed acreage sale, which may be a key factor in the Bluestone transaction, as noted by Judge Silverstein: QRCI did not pay an uneconomic Canadian gathering and processing commitment, which included significant unused firm capacity, due in late February 2015.. In early March 2015, the third-party service provider issued a demand letter regarding the missed payment and suspended service resulting in our Horn River Asset production being shut-in. Further, a termination notice was issued by the third-party service provider effective March 19, 2015. We continue to explore alternative to gather and process our Horn River Asset production; however, we may not be able to find economic alternatives in the near-term, or at all, and production may remain shut-in. Judge Silverstein indicated she will do her best to render a decision by the March 31st deadline for Bluestone to complete their purchase of the Quicksilver assets. A decision which allows the gathering agreements to be terminated will likely be a key factor in the sale of future acreage by struggling producers. So what should MLP Investors make of these judgments? It is certainly not good news, as it enables producer to negotiate with a stronger hand prior to bankruptcy, where the producer has viable options to replace their midstream providers. Creditors will also be more weary of extending capital and the market will demand higher rates on current and future debt issuance. Certainly midstream companies will be modifying their future agreements to address this issue, but for the moment, there is some MLP asset exposure to near insolvent producers, who constitute a small percentage of diversified midstream cash flows. Williams, which has significant exposure to Chesapeake by way of their Access Midstream acquisition a few years ago, outlined their view on the topic below: "And so here’s how we think about the risk. First of all, we have long term dedications with strong contractual conveyances of interest in unproduced gas. We like our argument that we hold a current real estate in unproduced gas and that our covenants running with the land not subject to the rejection in bankruptcy. We certainly are following current bankruptcy cases like Sabine where the general question is at issue. But people should understand that the ultimate outcome in individual cases will turn on specific facts and circumstances." "Regardless, even if the court were to rule we don’t have such legal rights, our gathering lines are physically connected to Chesapeake’s wellheads and pads. And we provide a very critical service, conditioning and connecting Chesapeake’s production to points where they can then choose the best markets for long haul transportation alternatives. In exchange for the dedication of production, we invested capital to build gathering lines that are uniquely positioned to serve Chesapeake’s well. So all these systems were built out specifically for their needs and generally at their direction as to the size and scale that they needed to be able to produce volumes on a projected basis." "In most cases, there are no other gathering lines nearby because these are big contiguous areas and, again, these systems were built specifically for their production. And in many cases, our pipelines have been built on populated places such as beneath the city of Fort Worth. And it would be very costly for others to replicate our gathering lines. And the rates of return that we generate from these investments and assets are very typical for a midstream provider." "Likewise, our gathering lines have been in place for some time, and thus, the reserves behind them are now partially produced. To continue to produce such gas, Chesapeake and its creditors, if that ever came to that, would want and need to utilize our gathering lines to deliver gas to the markets. So such gathering lines are just very distinguishable from long haul transportation service because the intra and interstate pipeline initiate service after the gas is already pulled at marketable points, producers then have many options to receive cash for their products other than transportation on any one particular interstate pipeline." "If it did come to a bankruptcy, a producer can argue that it can reject certain types of contracts. And we believe gathering contracts such as ours are not the type of contract that would be rejected. But even if the gathering contract were allowed to be rejected, a producer and its creditors will continue to need the gathering service to be able to produce gas and create revenue. If a producer rejects the gathering contract in a bankruptcy, the gatherer will no longer be obligated to provide the gathering service." "Furthermore, rejection of a contract is all or nothing. Therefore, the analysis of the risk of any producer’s bankruptcy is best analyzed contract by contract and really understanding that the particulars of the services being provided and how unique those services are that are being provided." MLP Management teams will now be pressed to provide greater transparency of their agreements and counter-parties, as likely will be finding their producer "partners" a little more emboldened with their concession requests. MLPData will provide updates to the Quicksilver case, and any other additional disclosures related to the midstream contract rejections or re-negotiations. Breaking News and Instant Analysis? Follow Us on Twitter Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here
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Mar 08, 2016
Bankruptcy Watch: Quicksilver Resources
The market is still assuming E&P restructuring's are waiting to be filed in order address the maturing obligations and bank covenants. To date, the filings have been few, but that may pick up after Spring Re-Determination, which may be much more aggressive than the previous Fall process. This week we focus on the Quicksilver Resources, which…
The market is still assuming E&P restructuring's are waiting to be filed in order address the maturing obligations and bank covenants. To date, the filings have been few, but that may pick up after Spring Re-Determination, which may be much more aggressive than the previous Fall process. This week we focus on the Quicksilver Resources, which is expected to receive judgment by March 31st, 2016 Quicksilver Update: This is a closely followed case related to the proposed sale of acreage from the bankrupt Quicksilver Resources to Bluestone Natural Resources. What is being contested is whether the dedicated gas processing and transportation agreements between Crestwood and Quicksilver can be terminated upon the sale of the acreage, a condition which Bluestone has placed on completing the $245MM transaction. Crestwood's position is that the gathering agreements are connected to the land, regardless of ownership, arguing that they otherwise would not have paid $741MM for the Quicksilver Gas Services pipelines on October 1, 2010. Being the largest producer on the network, Crestwood's position is that the gathering system's value is predicated upon the acreage for which is was developed. Bluestone's position is that the $65MM paid for gathering, processing and transportation through September 30, 2016 is above the prevailing market rates, despite the fact that Quicksilver recorded a $454MM gain when they sold the pipelines to Crestwood, as well as renegotiated the rates up to 65% lower in July 2014. Below are Quicksilver's rates and future volume commitments (excluding compression agreements in place with CSI Compressco as disclosed in their most recent 10k The company previously opted not to pay gathering fees for their Canadian Horn River acreage, which resulted in termination of service prior to any proposed acreage sale, which may be a key factor in the Bluestone transaction, as noted by Judge Silverstein Judge Silverstein indicated she will do her best to render a decision by the March 31st deadline for Bluestone to complete their purchase of the Quicksilver assets. A decision which allows the gathering agreements to be terminated will likely be a key factor in the sale of future acreage by struggling producers.
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Mar 04, 2016
Bankruptcy Watch: 3/4/16
The market is still assuming E&P restructuring's are waiting to be filed in order address the maturing obligations and bank covenants. To date, the filings have been few, but that may pick up after Spring Re-Determination, which may be much more aggressive than the previous Fall process. This week we have the following filings Green Hu…
The market is still assuming E&P restructuring's are waiting to be filed in order address the maturing obligations and bank covenants. To date, the filings have been few, but that may pick up after Spring Re-Determination, which may be much more aggressive than the previous Fall process. This week we have the following filings Green Hunter Resources: Ticker GRH a diversified water resource, waste management, environmental services, and hydrocarbon marketing company specializing in the unconventional oil and natural gas shale resource plays within the Appalachian Basin. The company expects to liquidate all assets No Midstream Agreements W&T Offshore: Ticker WTI W&T is an independent oil and natural gas producer with operations offshore in the Gulf of Mexico. We have grown through acquisitions, exploration and development and currently hold working interests in approximately 54 offshore fields in federal and state waters (50 producing and four fields capable of producing). Company drew done their remaining credit line and retained Kirkland & Ellis, suggesting a forthcoming restructuring. No Midstream Agreements We continue to monitor the Sabine Oil case for Judge Chapman's decision regarding the requested termination of Sabine's Minimum Volume Commitment agreements, as disclosed below in their 10Q
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Feb 29, 2016
MLP Short Interest
Short interest volume for trades reported through February 12 increased by 5% with Energy Transfer Partners increasing by 77% over the prior period
Short interest volume for trades reported through February 12 increased by 5% with Energy Transfer Partners increasing by 77% over the prior period
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Feb 27, 2016
MLP Credit Yields
As units have reported their Q4 results, the credit markets have adjusted to the updated financial information and guidance. Targa, DCP Midstream and Western Gas had the largest changes since 2/12/16
As units have reported their Q4 results, the credit markets have adjusted to the updated financial information and guidance. Targa, DCP Midstream and Western Gas had the largest changes since 2/12/16
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Feb 26, 2016
Midstream Risks and the Sabine Oil Case
Master Limited Partnerships have been under duress due to a myriad of factors, including excessive leverage, higher cost of capital, declining production and lower capex spending. Each MLP is weathering the storm to various degress, depending upon their assets and contract terms. However, the assumption that Take or Pay producer agreements…
Master Limited Partnerships have been under duress due to a myriad of factors, including excessive leverage, higher cost of capital, declining production and lower capex spending. Each MLP is weathering the storm to various degress, depending upon their assets and contract terms. However, the assumption that Take or Pay producer agreements provide some level of stability is an evolving risk for which the market is trying to better understand. A pending restructuring case, Sabine Oil and Gas, is petitioning to cancel the gathering agreements. On Tuesday, the Judge ruled that the agreements could be terminated. It is important to note that one decision does not equally apply to all midstream MLPs, or even MLP with similar assets. The midstream providers can have considerable leverage to the extent that the assets will continue to be in production, an assumed case for most Ch 11 filings. Williams Partners made an effort to educate the market on this topic during their recent conference call. With 18% of their EBITDA exposed to Chesapeake, which recently slashed their capex by 57% for 2016, the assumption is that Williams is exposed to a potential restructuring, leading to revised terms of prevailing midstream agreements, which the market has assumed to be at above market rates. Williams countered these assumptions by suggesting that their agreements are All or None, meaning that components cannot be renegotiated or terminated. Below is a more detailed explanation from Williams as described in their Q4 Conference Call by their CEO Alan Armstrong. "And so here’s how we think about the risk. First of all, we have long term dedications with strong contractual conveyances of interest in unproduced gas. We like our argument that we hold a current real estate in unproduced gas and that our covenants running with the land not subject to the rejection in bankruptcy. We certainly are following current bankruptcy cases like Sabine where the general question is at issue. But people should understand that the ultimate outcome in individual cases will turn on specific facts and circumstances." "Regardless, even if the court were to rule we don’t have such legal rights, our gathering lines are physically connected to Chesapeake’s wellheads and pads. And we provide a very critical service, conditioning and connecting Chesapeake’s production to points where they can then choose the best markets for long haul transportation alternatives. In exchange for the dedication of production, we invested capital to build gathering lines that are uniquely positioned to serve Chesapeake’s well. So all these systems were built out specifically for their needs and generally at their direction as to the size and scale that they needed to be able to produce volumes on a projected basis." "In most cases, there are no other gathering lines nearby because these are big contiguous areas and, again, these systems were built specifically for their production. And in many cases, our pipelines have been built on populated places such as beneath the city of Fort Worth. And it would be very costly for others to replicate our gathering lines. And the rates of return that we generate from these investments and assets are very typical for a midstream provider." "Likewise, our gathering lines have been in place for some time, and thus, the reserves behind them are now partially produced. To continue to produce such gas, Chesapeake and its creditors, if that ever came to that, would want and need to utilize our gathering lines to deliver gas to the markets. So such gathering lines are just very distinguishable from long haul transportation service because the intra and interstate pipeline initiate service after the gas is already pulled at marketable points, producers then have many options to receive cash for their products other than transportation on any one particular interstate pipeline." "If it did come to a bankruptcy, a producer can argue that it can reject certain types of contracts. And we believe gathering contracts such as ours are not the type of contract that would be rejected. But even if the gathering contract were allowed to be rejected, a producer and its creditors will continue to need the gathering service to be able to produce gas and create revenue. If a producer rejects the gathering contract in a bankruptcy, the gatherer will no longer be obligated to provide the gathering service." "Furthermore, rejection of a contract is all or nothing. Therefore, the analysis of the risk of any producer’s bankruptcy is best analyzed contract by contract and really understanding that the particulars of the services being provided and how unique those services are that are being provided." While it is unclear what the future holds for a Chesapeake restructuring, they have been able to reduce their G&P fees further by $50MM in 2016, this time at the expense of Energy Transfer, but in return purchased additional services at market rates. Below are a few comments made by Chesapeake's CEO, Robert Lawler, on their earnings call Question: What is the prize if Chesapeake were to renegotiate Minimum Volume Commitment agreements to market rates? CEO Response: It's very large and it is in the hundreds of millions range The table below provides the midstream commitments Chesapeake has made through 2019 Prior to the crude crash, MLP investors were comforted by pitch decks which suggested that their cash flows were stable and had no direct commodity price exposure. In hindsight, the positioning of such safety may not be applicable to current market conditions. Access Midstream Partner's, which provides the midstream gathering and processing services to Chesapeake, provided this slide from 2013, prior to their acquisition by Williams. While it remains to be seen how these negotiations are resolved prior to, or after, a potential restructuring, it is evident that the contracts as described in company presentations contain several caveats, which may diminish the implied safety of the cash flows. Investors will need to follow the extent to which midstream agreements are modified, or terminated, during a restructuring process. MLPData will continue to provide updates to the status of such agreements on our Insights section and Twitter Breaking News and Instant Analysis? Follow Us on Twitter Master Limited Partnerships have begun reporting their Q4 Earnings and their Outlook for 2016. Many midstream investors have sold out their positions based upon volatile market activity rather than for fundamental reasons, leading to further principal losses as units have bounced back after fundamentals have been updated. Subscribe to MLPData's Premium Service for access to the most timely current and historical unit metrics, cash flow coverage details, and forward guidance to support your buy, hold or sell decisions. Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here
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Feb 25, 2016
Bankruptcy Watch: 2/25/16
The market is still assuming E&P restructuring's are waiting to be filed in order address the maturing obligations and bank covenants. To date, the filings have been few, but that may pick up after Spring Re-Determination, which may be much more aggressive than the previous Fall process. This week we have the following filings Craig En…
The market is still assuming E&P restructuring's are waiting to be filed in order address the maturing obligations and bank covenants. To date, the filings have been few, but that may pick up after Spring Re-Determination, which may be much more aggressive than the previous Fall process. This week we have the following filings Craig Energy LLC Colorado No Midstream creditors listed in Ch 11 Filing
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Feb 12, 2016
MLP Credit Yields
The below table provides the change in bond yields, compared to the unit yields, Month to Date total returns and the Trailing Twelve Month Distributable Cash Flow coverage.
The below table provides the change in bond yields, compared to the unit yields, Month to Date total returns and the Trailing Twelve Month Distributable Cash Flow coverage.
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Feb 11, 2016
MLP Short Interest
As of January 29, 2016, the below table ranks unit short interest by the largest absolute changes in short sales, along with the current WTD and MTD total returns
As of January 29, 2016, the below table ranks unit short interest by the largest absolute changes in short sales, along with the current WTD and MTD total returns
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Feb 10, 2016
Quick Look: Plains All American Q4 Results and 2016 Guidance
On 2/9/16, Plains All American announced Q4 results, which were slightly below their previous Guidance, primarily due to the timing of revenue recognition related to credit worthy shippers, not counter party defaults, as some may have interpreted. Units dropped the morning after results were published, and management's comments did little to abate…
On 2/9/16, Plains All American announced Q4 results, which were slightly below their previous Guidance, primarily due to the timing of revenue recognition related to credit worthy shippers, not counter party defaults, as some may have interpreted. Units dropped the morning after results were published, and management's comments did little to abate the selling throughout the day as crude continued to weaken. The bridge between guidance and actual is below with our comments overlayed: 2016 Guidance Management forecasts EBITDA is expected to increase 4.9% from $2,168MM to $2,275MM assuming the 2016 average crude price will be $47.50 (Q1 $35, Q2 $45, Q3 $55, Q4 $60) . The company expects to have a DCF coverage ratio of .87x for 2016 at the midpoint. However, since the guidance was provided in January, the rig count has continued to decline (25% lower) with further commodity price declines (20% lower), which questions whether the guidance is now realistic as producers further cut capex budgets.. The company sees the next 12 to 24 months as very challenging, and feels that the $1.6B preferred issuance was timed properly and will help address market uncertainties. Below is the historical timeline of annual Adjusted EBITDA as projected by the company on the date of the last update: Management Questions The following are a few of the questions posed by MLP Analysts to Management during the call: Question: Any Changes to previously provided Distribution Guidance. Answer: No Question: Any thoughts about changing the company structure? Answer: Working on the analysis, which may be middle of the year, however, it is like trying to nail jello to a tree given the rapidly changing market valuations. Question: What % of MVC EBITDA is at risk in 2016? Answer: The MVC terms differ with makeup's occurring over monthly, quarterly and annual periods. Worst case, 1 to 2% of the total could be at risk, which are non investment grade shippers. Question: Are you still one and done? Answer: Yes, we are. We will not need capital for 2016 or 2017. We do not have a gun to our head. Question: What is the downside if the market is strong or weaker than forecasted? Answer: 3 to 4% on the downside to Guidance which may be offset by the benefits of contango. Summary PAA's distribution safety is a function of crude prices, which are well below ($33.72 current average) the expected price of $47.50. Further, the company carries a hefty IDR payment from PAA to PAGP, which historically has been an incentive for LP growth. However, with the prospects of declining capital expenditures, the idea of paying $400MM to the GP for no benefit, further adds risk to the units. It is unclear how PAGP could reduce any Incentive Distribution Rights payments given the legal structure, so the burden of the IDR's should be assumed to be a head-wind along with the new preferred payments, to maintaining the distribution, let alone any future growth.
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Feb 03, 2016
Quick Look: MPLX LP results for 4Q15
Quick Look: MPLX LP results for 4Q15 As MPLX LP reported 1Q15 results today, the market punished the units with as much as a 25% decrease through market hours. This follows an announcement last week to increase unit holder distributions by 6.4% to $0.50 per common unit for the 4th quarter of 2015, for a 29% increase in 2015. Recall the marke…
Quick Look: MPLX LP results for 4Q15 As MPLX LP reported 1Q15 results today, the market punished the units with as much as a 25% decrease through market hours. This follows an announcement last week to increase unit holder distributions by 6.4% to $0.50 per common unit for the 4th quarter of 2015, for a 29% increase in 2015. Recall the markets priced a 200 basis point increase after the merger, with the pre-merger yield of approximately 4.5%? Today added another 250+ basis point yield increase given the markets reaction, closing today with a yield of 9.15%. Why the downward plunge? Management changed their future distribution growth forecasts since their Analysts Day two months ago, from describing themselves as “peer-leading” to “normal”, from a 25% growth rate as of 12/3/15 to a current 2016 forecast of 12-15% - - - due to: Poor market price performance given the recently announced increase in distribution, so slowing future growth given the current yield levels Need to reduce debt leverage ratios to 4x by yearend, from the present 4.7x, to retain Investment Grade ratings Preserve capital and financing sources for when opportunities for growth improve versus the current yield chasing envirnoment. The Good News - Future asset dropdowns from MPLX parent sponsor, Marathon Petroleum Corporation, to continue as planned for 2Q16 with issued units expected to be financed by MPC. Dropdown of 2Q expected to add $30M to the quarterly EBITDA, or ~10.5%. - Other dropdowns under consideration for 3rd and 4th quarters, with $1.6B in EBITDA in potential dropdowns. - Ten new fractionation projects continue, although schedules are extended longer to reduce organic capital growth expenditures by $450M. - Project on schedule for completion of MPLX's first entry into the Permian Basin. - MPLX has strong financial flexibility to manage and grow asset base as market conditions improve. - For any MPLX forecasts beyond 2016, manage expects to target unit distribution coverage ratios at 1.1x distributable cash flow. Conclusion Management restated multiple times throughout the call that the merger combines strong underlying assets with complementing operations that are performing well, however as prudent managers and given the current yields, MPLX needs to reduce the growth expansion rate and “keep powder dry” for a more opportune market environment given the commodity prices. The market certainly hasn’t rewarded 2015’s consecutive growth of MPLX distributions in the past as a self-described "peer-leading" growth manager of distributions, so perhaps it is time to try something new.
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Jan 30, 2016
Kayne Anderson's Annual Review
Kayne Anderson, the $16B energy asset manager, described their 2015 performance to shareholders as "Simply put, it was a terrible year for the Company" a rather unfiltered description of the pain that both investors and management experienced. The letter goes on to explain their views on market valuations and what the future holds for Master Limit…
Kayne Anderson, the $16B energy asset manager, described their 2015 performance to shareholders as "Simply put, it was a terrible year for the Company" a rather unfiltered description of the pain that both investors and management experienced. The letter goes on to explain their views on market valuations and what the future holds for Master Limited Partnerships. It is a good read from a very experienced MLP manager
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Jan 30, 2016
MLP Short Interest
Below are the short interest changes from December 31st 2015 through January 15th, 2016 for units with the highest number of short sold shares
Below are the short interest changes from December 31st 2015 through January 15th, 2016 for units with the highest number of short sold shares
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Jan 28, 2016
Quick Look: Enterprise Products Partners Q4 Results
On January 28th, Enterprise Products released their Q4 results, and for first time, offered forward guidance in light of market volatility. Below are the highlights from the earnings release and conference call comments Q4 Distribution of $0.39 was covered by 1.3x of Distributable Cash Flow Retained $302MM of DCF in Q4 Revenues dec…
On January 28th, Enterprise Products released their Q4 results, and for first time, offered forward guidance in light of market volatility. Below are the highlights from the earnings release and conference call comments Q4 Distribution of $0.39 was covered by 1.3x of Distributable Cash Flow Retained $302MM of DCF in Q4 Revenues declined 40% Quarter over Quarter, but costs were also reduced by 43% Expect to increase 2016 Distributions to $1.61 for the year, or 5.2% higher than 2015 2.4% of Revenues are exposed to at risk E&P Permian volumes increasing, flat elsewhere, slight declines in Eagle Ford 2016 Capex expected to be $2.5 to $2.8B, including the final EFS installment payment. Change from previously higher estimates is related to the timing rather than a reduction. Management would not comment on how the growth capex will be funded specifically, but outlined the sources as retained cash flow, potential asset sales, debt/equity issuance or EPCO direct unit purchases Management was asked about margin pressure, and responded that there are many conversations, but did not provide any specifics Summary: EPD produced another strong quarter in spite of the headwinds. They do expect 2016 to be more challenging than 2015, but has still committed to a 5.2% distribution increase Year over Year. Management clearly projects confidence with their ability to manage in a volatile production environment and offer a strong foundation of knowledge and experience. They are focused on Demand pull projects other than the Permian pipeline, insulating themselves from producer uncertainty.
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Jan 20, 2016
Bankruptcy Watch 1/25/16
With market participants fixated on the fate of US Shale producers and their midstream agreements, MLPData will be publishing a weekly roundup of E&P filings and their midstream creditors as disclosed in their filing. Our goal is to ensure that midstream MLP investors are aware of unsecured creditor status associated with a bankruptcy filing.…
With market participants fixated on the fate of US Shale producers and their midstream agreements, MLPData will be publishing a weekly roundup of E&P filings and their midstream creditors as disclosed in their filing. Our goal is to ensure that midstream MLP investors are aware of unsecured creditor status associated with a bankruptcy filing. Midstream agreements can be modified prior to, and as a result of, bankruptcy. The extent to which the agreements are modified are opaque, but the Top 20 Unsecured Credit list, published in a Bankruptcy filing, provides insight into the receivables and revenues at risk from re-negotiation or termination Moody's downgrades Eclipse's CFR to Caa2; outlook negative, concern that Company may not be able to cover Interest Expense MLP Exposure: EnLink Midstream Partners Ticker: ENLK
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Jan 19, 2016
Bankruptcy Watch 1/19/16
With market participants fixated on the fate of US Shale producers and their midstream agreements, MLPData will be publishing a weekly roundup of E&P filings and their midstream creditors as disclosed in their filing. Our goal is to ensure that midstream MLP investors are aware of unsecured creditor status associated with a bankruptcy filing.…
With market participants fixated on the fate of US Shale producers and their midstream agreements, MLPData will be publishing a weekly roundup of E&P filings and their midstream creditors as disclosed in their filing. Our goal is to ensure that midstream MLP investors are aware of unsecured creditor status associated with a bankruptcy filing. Midstream agreements can be modified prior to, and as a result of, bankruptcy. The extent to which the agreements are modified are opaque, but the Top 20 Unsecured Credit list, published in a Bankruptcy filing, provides insight into the receivables and revenues at risk from re-negotiation or termination BANKRUPTCY FILING - 12/15/15 MAGNUM HUNTER COUNTERPARTY: EXTERRAN ENERGY SOLUTIONS LP, USA COMPRESSION PARTNERS BALANCE: $314,938 POSSIBLE MLP EXPOSURE - USA Compression Partners Ticker: USAC Archrock Partners LP Ticker APLP Balance: $1,352,000 Exterran Energy Solutions L.P., is a wholly-owned subsidiary of Exterran Corporation, a to be publicly listed international compression services and global fabrication company based in Houston. It is not clear as to whether the contracted party is the Archrock MLP or Exterran.
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Jan 14, 2016
MLP Short Interest
Below is the table of short interest as of 12/31/15. Investors shorted an additional 21.65MM shares of Energy Transfer between 12/15 and 12/31, during which time shares actually had a positive return due to year end buying Top Declines in Short interest 12/15/15 to 12/31/15
Below is the table of short interest as of 12/31/15. Investors shorted an additional 21.65MM shares of Energy Transfer between 12/15 and 12/31, during which time shares actually had a positive return due to year end buying Top Declines in Short interest 12/15/15 to 12/31/15
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Jan 13, 2016
Plains All American: One and Done?
Prior to the market open on Tuesday, January 12, Plains All American announced their plans to finance their 2 year $2B growth capital commitments and distributable cash flow shortfall while avoiding the capital markets. While many observers expected Plains to cut their Q4 distribution from $0.70, Plains followed through on their previous suggestio…
Prior to the market open on Tuesday, January 12, Plains All American announced their plans to finance their 2 year $2B growth capital commitments and distributable cash flow shortfall while avoiding the capital markets. While many observers expected Plains to cut their Q4 distribution from $0.70, Plains followed through on their previous suggestions that such a move would not be necessary, confirming their Q4 distribution rate of $0.70. The more compelling information was related to their $1.5B capital raise from four energy focused PE shops, Kayne Anderson, EnCap, Energy Minerals Group and First Reserve. The new capital, expected to close in January, will be raised using a new Perpetual 8% Preferred share, which will pay $2.10 per annum, and offers the buyers the right to convert into PAA units after two years and prohibits the PE investors from hedging their PAA exposure. Plains also will maintain the option to pay the 8% in new PIK through 2017. The most important aspect of this these new shares are the Incentive Distribution Rights provisions. If Plains were to issue new units to the market, each new unit would create an incremental IDR fee paid from PAA to their General Partner, Plains GP Holdings. If they were to have used that option, the IDR burden would have been $0.8285 per unit at their current distribution rate, or roughly $46MM if they were to have issued 56MM new units (which is the conversion rate for the new preferred's increasing units by 14%). Over the two year period prior to the conversion option, the total would have been $92MM assuming the 2016 distribution remains flat. In order to offset this burden, Plains GP agreed to waive their IDR fee for these incremental units by only receiving 50% of the distribution rate above the current rate. Plains also provided their 2015 and 2016 outlook and assumptions: - 2015 Full Year EBITDA will be on low range of guidance due to propane margins and the recent tornadoes. This is about 5% lower from the guidance provided at the beginning of the year. - 2016 Crude prices will average $47.50 and $67.50 in 2017 with a volume decrease of roughly 5% as indicated below - 2016 Expected EBITDA $2.3B, a 4.5% increase, but impacted by declining Supply and Logistics margin as indicated below To summarize, Plains will pay an 8% rate for the capital versus 13% if they had to have issued new units and will likely maintain their current distribution rate through 2017 at the least. Plains GP shareholders will now also have a flat outlook where neither new units or a distribution increase will change their IDR cash flows through 2017. Plains investors will be rewarded if crude prices increase, along with volumes. If prices remain below $40 through Q4 of 2017, volatility and risk increase as the lower for longer ramifications will be a continued focus of speculation and a shrinking base of investors. Follow Us on Twitter for breaking News and Analysis Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Are you looking to keep track of your MLP Distributions? Check our our Portfolio application illustrated below
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Jan 08, 2016
MLP Credit Yields
Since the holiday break, MLP credit yields have improved through 1/7/2016, despite the drop in crude. Spectra Energy, Cheniere and Targa Resources led the group in yield improvement. Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor…
Since the holiday break, MLP credit yields have improved through 1/7/2016, despite the drop in crude. Spectra Energy, Cheniere and Targa Resources led the group in yield improvement. Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here
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Jan 07, 2016
MLP Fund Concentrations
Paying close attention to MLP Fund rotations and concentrations can provide investors with insights into how institutional managers view the risk reward relationships for various units. MLPData tracks the weekly fund flows and the monthly top ten positions as reported by the funds, in order to identify relative changes in sentiment. As of 12/31/15…
Paying close attention to MLP Fund rotations and concentrations can provide investors with insights into how institutional managers view the risk reward relationships for various units. MLPData tracks the weekly fund flows and the monthly top ten positions as reported by the funds, in order to identify relative changes in sentiment. As of 12/31/15, the below grid displays the top 10 holdings across the largest actively managed fund. Although Energy Transfer Partners is a distant second in market cap to Enterprise Products, it is the only MLP held as a top ten position across all of funds below, suggesting that the research teams continue to feel comfortable about their distribution coverage and ability to manage their growth capital objectives remium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Are you looking to keep track of your MLP Distributions? Check our our Portfolio application illustrated below Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPData LLC
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Jan 06, 2016
Bankruptcy Watch First Edition
With market participants fixated on the fate of US Shale producers and their midstream agreements, MLPData will be publishing a weekly roundup of E&P filings and their midstream creditors as disclosed in their filing. Our goal is to ensure that midstream MLP investors are aware of unsecured creditor status associated with a bankruptcy filing.…
With market participants fixated on the fate of US Shale producers and their midstream agreements, MLPData will be publishing a weekly roundup of E&P filings and their midstream creditors as disclosed in their filing. Our goal is to ensure that midstream MLP investors are aware of unsecured creditor status associated with a bankruptcy filing. Midstream agreements can be modified prior to, and as a result of, bankruptcy. The extent to which the agreements are modified are opaque, but the Top 20 Unsecured Credit list, published in a Bankruptcy filing, provides insight into the receivables and revenues at risk from re-negotiation or termination BANKRUPTCY FILING - 12/31/15 SWIFT ENERGY COMPANY COUNTERPARTY: EXTERRAN ENERGY SOLUTIONS LP BALANCE: $1,426,209 POSSIBLE MLP EXPOSURE - ARCHROCK PARTNERS LP TICKER APLP Exterran Energy Solutions L.P., is a wholly-owned subsidiary of Exterran Corporation, a to be publicly listed international compression services and global fabrication company based in Houston. It is not clear as to whether the contracted party is the Archrock MLP or Exterran. Archrock Partners LP DCF
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Jan 04, 2016
Tallgrass Energy Partners Keeps on Growing
Over the past 12 months, most investors have been averse to the idea of investing in crude pipeline assets. But in the nuanced world of Master Limited Partnerships, the location of the pipelines, and the balance sheet of the acquiring entity, can make such assets look attractive The Pony Express Pipeline (PXP), a 760 mile crude pipeline from Guer…
Over the past 12 months, most investors have been averse to the idea of investing in crude pipeline assets. But in the nuanced world of Master Limited Partnerships, the location of the pipelines, and the balance sheet of the acquiring entity, can make such assets look attractive The Pony Express Pipeline (PXP), a 760 mile crude pipeline from Guernsey, WY to Cushing, OK, is an outlet for Bakeen, Niobara, and Powder River Basin crude production, which can transport up to 320,000 barrels per day, PXP was originally a natural gas pipeline owned by Kinder Morgan, which was sold to Tallgrass Development (TDEV) in 2012. TDEV expanded the capacity and converted the pipeline to carry crude in 2014. Tallgrass Energy Partners (TEP) acquired an additional ownership stake in PXP in July 2014 for 9x EBITDA. In the Q3 earnings call, Tallgrass Energy disclosed that November volumes were 10% higher and the pipeline was operating at capacity, despite the drop is rig counts and crude strip prices. After authorizing a 6.7% increase in their Q4 distribution on January 4th, Tallgrass Energy announced the acquisition of an additional 31.3% interest in PXP, raising their ownership to 98%. The $743MM acquisition will be funded the issuance of 6.5MM new units to TDEV, with a call option to repurchase the units at $42.50 within the next 18 months. The remaining balance of $475MM will be funded by their existing credit line, leaving $272MM available on their line after the acquisition. This transaction has been expected, but perhaps TDEV funding the full equity allocation may have been a surprise given the 5.82% yield. The last time they raised equity in the public markets, TEP was yielding 3.96%. The drop down will help fund their 20% distribution growth target through 2017. A sponsor willing to purchase the equity needed to fund dropdown allows the balance sheet to remain in good shape to partially fund future drops, such as REX. TDEV, by way of their ownership in Tallgrass Energy GP, will benefit from the increase in the IDR payments as a result of the increase in units outstanding, which are presently at the 50% split. Below are TEP's unit metrics for the last several quarters, indicating current leverage near 3.0x prior to the acquisition. Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here
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Dec 26, 2015
MLP Short Interest
Prior to the week 12/21/15, Master Limited Partnerships have been on a downward spiral primarily on the concerns about distribution safety in light of a lower for longer energy outlook. Although the fall has been rapid, short sales do not seem to be a major factor, as total short sales have been in the 350,000,000 share range for the last 6 we…
Prior to the week 12/21/15, Master Limited Partnerships have been on a downward spiral primarily on the concerns about distribution safety in light of a lower for longer energy outlook. Although the fall has been rapid, short sales do not seem to be a major factor, as total short sales have been in the 350,000,000 share range for the last 6 weeks, fluctuating by +/-14,000,000 shares. Below are the units ranked by greatest change in the last reported week of 12/15. The Week To Date column indicates that despite the top increases in Energy Transfer Equity, MPLX LP and Targa Resources Corp, each of the units moved higher this week. Below are the units (we keep KMI in the list as a proxy) which had the greatest reduction is short sales outstanding
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Dec 26, 2015
Guidance and Support
During the week of 12/21/15, the following companies issued press releases aimed at increasing investor confidence: ONEOK and ONEOK Partners: Operational Guidance issued 12/21 We expect 2016 earnings to be driven by continued natural gas and natural gas liquids volume growth across our integrated pipeline system, with strong year-end perform…
During the week of 12/21/15, the following companies issued press releases aimed at increasing investor confidence: ONEOK and ONEOK Partners: Operational Guidance issued 12/21 We expect 2016 earnings to be driven by continued natural gas and natural gas liquids volume growth across our integrated pipeline system, with strong year-end performance providing us momentum into 2016. Our substantial backlog of well connects, flared gas inventory in the Williston Basin and uncompleted wells provides considerable visibility into our 2016 volumes," said Terry K. Spencer, president and chief executive officer of ONEOK and ONEOK Partners. "Our commodity price outlook remains cautious for 2016. However, we expect the partnership's 2016 earnings to increase compared with 2015 guidance, primarily from volume and fee-based margin increases, resulting in increased distributable cash flow. "At ONEOK Partners, we remain committed to maintaining our investment-grade credit ratings, sustaining our current distribution and achieving distribution coverage of 1.0 times or better in 2016 at current NYMEX future strip pricing of $40 to $45 per barrel of crude. ONEOK Partners does not expect to access the public equity markets in 2016 and well into 2017," said Spencer. "If needed, ONEOK continues to be well-positioned to provide financial support to ONEOK Partners. We have a long history of prudent financial decision-making, as demonstrated by the $750 million of equity raised at the partnership this past summer, and we will continue to make decisions that are in the best long-term interest of our investors at both ONEOK and the partnership to create value, reduce risk and protect the partnership's investment-grade credit rating. "The partnership has a solid balance sheet and ample liquidity, including access to our commercial paper program and $2.4 billion credit facility, to support our current capital-growth program and fund the 2016 long-term debt maturities," Spencer said. "We continue to evaluate long-term debt financing alternatives for our 2016 debt maturities, but our strong liquidity position allows us to be opportunistic when refinancing. Additionally, ONEOK has no maturities until 2022 and an unutilized $300 million credit facility. The credit facility can be drawn to facilitate purchasing partnership equity, with the expectation to repay those borrowings with internally generated cash flow. "ONEOK Partners is well-positioned to not only withstand the low commodity price and uncertain capital market environment but also to take advantage of opportunities," added Spencer. "Our strong position in the Williston Basincontinues to serve us well, and we continue to benefit from a large natural gas supply backlog in the basin. Our natural gas pipelines segment is well-positioned to expand its fee-based natural gas export capabilities in the future, particularly to Mexico where we have key relationships through our joint venture Roadrunner Gas Transmission pipeline. Our large and extensive natural gas liquids business maintains a growing position in the emerging Stack and SCOOP plays in Oklahoma, and we remain well-positioned in the Gulf Coast to take advantage of ethane demand growth potential over the next two years." American Midstream Partners: Issued 12/21/15 Affiliates of ArcLight Capital Partners, LLC (“ArcLight”), which controls the general partner of American Midstream Partners, LP (NYSE: AMID) (the “Partnership”) today announced that ArcLight has approved a unit purchase program (the “Purchase Program”) whereby ArcLight may purchase up to $75 million of common units of the Partnership. ArcLight’s unit purchases are expected to commence as early as December 22, 2015. ArcLight may purchase units under the Purchase Program in open market transactions, in privately negotiated transactions, or otherwise. The amount and timing of any ArcLight unit purchases may vary and will be determined based on market conditions, unit price and other factors. The Purchase Program does not require ArcLight to purchase a specific number of units. There can be no assurance that ArcLight will purchase any units under the Purchase Program, and the Purchase Program may be modified or suspended at any time without prior notice. ArcLight’s unit purchases, if any, made under the Purchase Program will not impact the total number of units outstanding. “As the sponsor of the Partnership, we strongly believe the Partnership’s current unit price undervalues the assets of the Partnership. In light of this belief, as well as our confidence in the strength of these assets, the management team, and prospects for the future, ArcLight authorized an additional $75 million investment to be used for ArcLight to acquire common units of the Partnership,” commented Dan Revers, Managing Partner of ArcLight. “We are pleased to broaden our financial commitment to the Partnership through the Purchase Program. KNOT Offshore Partners: Operational Update 12/21/15 Despite the disruption in the capital markets, the Partnership has not experienced any material changes in its operations since its third quarter 2015 earnings announcement on November 5, 2015. The Partnership’s underlying business continues to perform well in the fourth quarter. The Partnership’s vessels have experienced 100% utilization in the months of October and November 2015. As a result of the acquisition of the shuttle tanker Ingrid Knutsenon October 15, 2015, the Partnership expects to report incrementally higher Adjusted EBITDA in the fourth quarter of 2015. Furthermore, the Partnership has no newbuilding commitments and no loan maturities before the second half of 2018. Therefore, the Partnership's management currently expects to recommend to the board of directors (the “Board”) an unchanged distribution of $0.52 per unit with respect to the fourth quarter of 2015. The Board must approve the fourth quarter of 2015 distribution and this approval will be dependent upon, among other things, the absence of any material adverse developments at the time of the determination. Management expects the Board to meet in January 2016 to determine this cash distribution Rice Energy: Issued 12/21/15 Rice Energy Inc. (NYSE: RICE) ("Rice") today announced that it has agreed to non-binding terms with an energy infrastructure fund to invest up to $500 million in preferred equity in Rice Midstream Holdings LLC ("RMH"), a wholly-owned subsidiary of Rice, and common equity in a new wholly-owned subsidiary of RMH, "GP Holdings", which will be formed to hold the common units, subordinated units and incentive distribution rights in Rice Midstream Partners LP (NYSE: RMP) currently held by RMH. The closing of the transaction is expected to occur in the first quarter of 2016 and is subject to the completion of diligence, definitive documentation and satisfactory customary conditions precedent. At closing, Rice Energy plans to utilize $375 million, of which it intends to use a portion to repay all outstanding borrowings under RMH's revolving credit facility, and the remainder to fund Rice's 2016 development of its core Marcellus Shale and Utica Shale wells
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Dec 19, 2015
Kayne Cuts, Blames Kinder
On Friday, Kayne Anderson held a conference call to address recent market events and the impact on their funds. Kayne announced reduced distributions across all their CEF funds in order to achieve 1.0x coverage, the percentage cuts were as follows: KYN -16% KYE -32% KMF -12% KED - 9% Kayne outlined the following factors an…
On Friday, Kayne Anderson held a conference call to address recent market events and the impact on their funds. Kayne announced reduced distributions across all their CEF funds in order to achieve 1.0x coverage, the percentage cuts were as follows: KYN -16% KYE -32% KMF -12% KED - 9% Kayne outlined the following factors and observations for the dividend cuts: M&A which reduced portfolio weighted yield and income Reduced Leverage from MLP unit declines Kayne reduced Kinder Morgan’s holdings by $723MM over the past year, but still held a very large position DO NOT EXPECT to see any additional distribution cuts in their portfolios, but they have projected a cut in one of their holdings Expect Many Unit to stop or slow growth in 2016 Below is the latest holdings for KYN as of 10/31, and the names in yellow are midstream units which have elevated yield levels, which Kayne is expecting not to cut distributions IF their current portfolio is similar to what has been reported as per below. In a move to show their support, Kayne Management will invest $14MM of their after tax management fees back into the funds, at the higher of the NAV or Closing price. Since June, the management team has invested $42MM in their funds. Kayne pointed out that they did not agree with Kinder’s actions, and thought they had better options. The Moody’s negative outlook change came as a shock to Kinder’s management. Kayne believes that the damage was self-inflicted, and Kinder could have either sold assets or issued additional preferred shares, and should kept their dividend flat. Kayne points out that they properly understood the risks of their KMI holdings and they exercised their judgment of what the management should do. They need to rely on Management’s comments, and in the case of Kinder, they communicated a growth plan just prior to the cut. So will other management teams follow Kinder’s cut? Those who have have realized a negative incentive for management teams to do so. Teekay also followed the path of Kinder this past week, and have realized the same results when they chose to reduce the distribution to fund new capex growth. Kayne believes the MLP model will survive and thrive. Over the past few years, MLP’s have expected capital markets to be available for long term funding, and some management teams committed to multi year growth plans. This crisis will force management teams to define projects with a 12-18 month outlook using their balance sheets. Kayne expects prices to rebound in the second half and could end the year between $55 and $60. Gas will have a difficult time trading about $3 in the near future. What if the forecast is wrong? Only 4 basins in the US have a breakeven price of below $60 bbl, which means that the issue is not IF but WHEN. If prices stay in their current range of $40, US production could fall to 8.2MM bpd (vs 9.1MM current), so the portfolio strategy is to be defensive in case the rebound process takes longer and focus on assets where production cuts may be less significant. Kayne suggests a lower for longer scenario will not cripple MLP midstream assets. Historically, it was easier to model MLP cash flows and the expected distribution growth rates. But it has become more difficult to assess how management teams will address their balance sheets. Kayne finds it unbelievable that MLP’s have been hit harder than Oil Field Services companies. On the final note, Kayne noted that this has been one of their best years for raising Institutional capital for MLP's.
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Dec 19, 2015
MLP Bond Yields On the Move
With MLP units reeling from lower crude prices and distribution cuts, bond investors have been trading some midstream credits lower. The below table provides Week to Week comparisons, with Targa and Summit Midstream realizing the greatest increase in yield from the beginning of December
With MLP units reeling from lower crude prices and distribution cuts, bond investors have been trading some midstream credits lower. The below table provides Week to Week comparisons, with Targa and Summit Midstream realizing the greatest increase in yield from the beginning of December
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Dec 18, 2015
MLP Short Interest
The below table provides the change in short interest and the corresponding Week to Date and Month to Date performance. Despite the reduction of 6MM shares in ETE's short interest, the stock is down over -41% for the month.
The below table provides the change in short interest and the corresponding Week to Date and Month to Date performance. Despite the reduction of 6MM shares in ETE's short interest, the stock is down over -41% for the month.
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Dec 18, 2015
Closed End Fund Short Interest
Master Limited Partnership Funds have been getting crushed as of late as funds reduce leverage as well as the rising level of short interest. The Goldman Sachs MLP and Energy Renaissance Fund is leading the list with almost 1MM of short interest. The fund's top ten holdings consist of high yielding low leverage names, including Teekay, which redu…
Master Limited Partnership Funds have been getting crushed as of late as funds reduce leverage as well as the rising level of short interest. The Goldman Sachs MLP and Energy Renaissance Fund is leading the list with almost 1MM of short interest. The fund's top ten holdings consist of high yielding low leverage names, including Teekay, which reduced their dividend this past week by 80%
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Dec 10, 2015
Summary of the 14th Annual Wells Fargo Energy Symposium
December 8 & 9, NYC 1,937 registered participants, up from 1,741 last year and 1,567 in 2013 Overview Given the timing for KMI’s dividend cut announced on December 8th, and their conference call on the 9th, much of the discussion was around MLP management teams strongly affirming their intentions to maintain distributions, while investors…
December 8 & 9, NYC 1,937 registered participants, up from 1,741 last year and 1,567 in 2013 Overview Given the timing for KMI’s dividend cut announced on December 8th, and their conference call on the 9th, much of the discussion was around MLP management teams strongly affirming their intentions to maintain distributions, while investors seemed doubtful. KMI was not present at conference. Management teams were asked why they should not cut distributions and self-fund, instead of accessing traditional capital markets. Most of the teams responded that they were managing growth projects and capital management projects with higher ROI hurdle rates, and would explore other alternatives if necessary Other financing options or hybrid securities discussed for 2016 include: Convertible preferred and preferred equity Private investment in public equities (PIPES) Sponsors taking back units Asset Sales, capex reductions, sponsor support EEP, ETP, PAA were adamant that they are not cutting distributions. Other general topics: The market is valuing coverage and distributions stability over growth now, making it necessary for management teams to reassess capital growth needs. Investors are focused on leverage metrics, including consolidated leverage at GP/LP. Investors are generally very pessimistic about energy fundamentals and capital markets access, while management teams seem to be taking longer term perspectives and are not looking to make any major changes based on short-term dislocation in stock prices. Investor questions focused on the quality of cash flows: amounts from fee-based backed by take-or-pay contracts and/or minimum volume commitments, versus volume sensitive fee-based cash flow, along with Pay-on-Production (POP) - - - along with the ability of customers to re-negotiate contracts. A general theme among speakers was 2016 forecasts being pushed out in to 2017 for many growth plans, with supply/demand equilibrium being reached for oil prices. Sound bites: Operating margins felt by crude pipeline operators in mature basins, due to “heavy excess capacity” with recent build-outs overshooting demand, while trucking fleets dropped prices…”never seen that before”. PAA/PAGP CEO Greg Armstrong “With a lifetime perspective in energy…this operating environment is like 1986, not ’08 or ’98 Russian collapse, but ’08! OPEC totally controlling again, through dumping to punish other producers.” Sylvester Johnson, CEO, Carrizo Oil & Gas (not an MLP) By the way, the price of oil fell in 1986 from $27 to below $10, an equivalent CPI value adjusted for 2015 is from $59 to below $22! Commodity Forecasts provided by Rating Agencies and guest speaker Ponderosa Advisors 2016 2017 Oil /Bbl Gas /MMBtu Oil /Bbl Gas /MMBtu Fitch $48 $2.75 $55 $3.00 Moodys $45 $3.00 $50 $3.25 S&P $45 $3.00 $50 $3.25 Ponderosa $52 $2.86 $56 $3.25 Growth In Global Crude oil Supplies Is Outpacing Demand Growth Source: Ponderosa Advisors
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Dec 10, 2015
Kinder Cuts
After a recent acquisition which triggered a Moody’s downgrade, Kinder Morgan announced on Tuesday that they will be reducing their dividend from $2.04 to $0.50 per year, starting with their February 2016 payment. After the Tuesday evening announcement, MLP investors were feeling nervous about how this news may impact other highly leveraged Mi…
After a recent acquisition which triggered a Moody’s downgrade, Kinder Morgan announced on Tuesday that they will be reducing their dividend from $2.04 to $0.50 per year, starting with their February 2016 payment. After the Tuesday evening announcement, MLP investors were feeling nervous about how this news may impact other highly leveraged Midstream units. Prior to market open on Wednesday, Management held a conference call where Rich Kinder, who as recently as October 21st, reaffirmed their 6-10% dividend growth guidance, offered the following comments: - Despite the weakness in the energy value chain, Kinder expects to achieve 95% of their forecasted EBITDA for 2015. The $5B DCF 2016 forecast is based upon the current energy environment - The downgrade was unexpected, as Rating agencies had not previously included proportional debt from unconsolidated joint ventures, which is what triggered the negative outlook change from Moody’s after the announced NGPL acquisition the week prior - With maintaining an Investment Grade credit the highest priority, Kinder Morgan had to make a decision to reduce growth projects for 2016 forward, in which they could maintain the dividend with perhaps some growth. They chose not to reduce growth investments, but rather use their cash flows to fund their 2016 capex budget, and improve the balance sheet. - As a result of the above, Rich Kinder, who made the point to reminder investors that Management, which owns 1/6th of the equity will feel equal short term pain from the new dividend policy, summarized Kinder Morgan’s position with these four points Expect to have no need to access equity market in foreseeable future Substantially reduce need for debt Expect to maintain Investment Grade credit Expect to grow DCF During the Q&A, the Management team was certainly humbled by the recent market events, and mentioned they set the new dividend to be slightly higher than the S&P yield, which they thought would continue to attract income focused funds. CFO Kim Dang suggested that when using Distributable Cash Flow per unit as the peer metric, Kinder will be trading at a 7.0x multiple, vs the market average of 10-11x, implying that there is the potential for share appreciation as the investor base transitions from Income to Value focused investors. As the chart below shows, Income focused retail investors will continue to sell their shares On Wednesday, the Master Limited Partnership benchmark index traded higher 7.6%, as the market likely focused on the health of Kinder’s EBITDA outlook ($7.8B 8% YoY growth) and the assumption that other midstream providers may have better 2016 cash flows than expected. MLP management teams also will now have the benefit of understanding how Moody’s may evaluate future transactions, reducing the risk of creating a similar set of circumstances which forced Kinder to take action. Kinder Morgan's precipitous fall was triggered by an acquisition and not a dramatic change to their expected cash flows, which should provide some relief to investors, at least for the time being. Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Are you looking to keep track of your MLP Distributions? Check our our Portfolio application illustrated below
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Dec 09, 2015
MLP Short Interest
Since the Moody's downgrade of Kinder Morgan, and their subsequent distribution announcement to cut the annual dividend from $2.04 to $0.50 commencing in February 2016, Master Limited Partnerships have traded with significant volatility. Below is the latest short interest ranking by Current Short Interest
Since the Moody's downgrade of Kinder Morgan, and their subsequent distribution announcement to cut the annual dividend from $2.04 to $0.50 commencing in February 2016, Master Limited Partnerships have traded with significant volatility. Below is the latest short interest ranking by Current Short Interest
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Dec 09, 2015
MLP Closed End Fund Short Interest
After a volatile week, the below is the current Short Interest shares outstanding for the MLPData universe of Closed End Funds
After a volatile week, the below is the current Short Interest shares outstanding for the MLPData universe of Closed End Funds
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Dec 05, 2015
MLP Credit Yields
MLP equity units were crushed this week with the benchmark index down -10.88% on the fears of a credit downgrade for Kinder Morgan which may lead to a change in their dividend growth policy. Long term debt yields were modestly changed from the beginning , but yields are trending higher for most issuers since September. Individual benchmark bond d…
MLP equity units were crushed this week with the benchmark index down -10.88% on the fears of a credit downgrade for Kinder Morgan which may lead to a change in their dividend growth policy. Long term debt yields were modestly changed from the beginning , but yields are trending higher for most issuers since September. Individual benchmark bond data can be found on the Quote and Chart pages.
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Dec 01, 2015
MLP Credit Yields
The below table provides a trending view of how creditors assess the risks associated with MLP long term debt. Individual benchmark bond data can be found on the Quote and Chart pages.
The below table provides a trending view of how creditors assess the risks associated with MLP long term debt. Individual benchmark bond data can be found on the Quote and Chart pages.
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Nov 26, 2015
MLP Closed End Fund Short Interest
Short interest continues to increase for both Closed End Funds with various levels of liquidity. More recently issued funds, such as DSE and NML could be targeted as investors accounts are well below their IPO price and may be of greater risk for tax loss selling Premium Subscribers can access Weekly Fund Flows Here Premium Subs…
Short interest continues to increase for both Closed End Funds with various levels of liquidity. More recently issued funds, such as DSE and NML could be targeted as investors accounts are well below their IPO price and may be of greater risk for tax loss selling Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPData LLC
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Nov 26, 2015
MLP Short Interest
The market has reduced the short interest of Plains GP Holdings by 1.8MM shares, but has increased the short interest of Plains All American by 1.9MM units, during the same period TOP DECREASES IN MLP SHORT INTEREST TOP INCREASES IN MLP SHORT INTEREST Premium Subscribers can access Weekly Fund Flo…
The market has reduced the short interest of Plains GP Holdings by 1.8MM shares, but has increased the short interest of Plains All American by 1.9MM units, during the same period TOP DECREASES IN MLP SHORT INTEREST TOP INCREASES IN MLP SHORT INTEREST Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPData LLC
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Nov 19, 2015
IPO Preview: Noble Midstream Partners
Current market conditions would suggest that an IPO of a Master Limited Partnership with a single customer might be a difficult deal to close, but lead managers Barclays, JP Morgan and Baird are planning to bring the $250MM offering of Noble Midstream Partners to market on Friday with a midpoint distribution yield of 6.25%. The company expects 20%…
Current market conditions would suggest that an IPO of a Master Limited Partnership with a single customer might be a difficult deal to close, but lead managers Barclays, JP Morgan and Baird are planning to bring the $250MM offering of Noble Midstream Partners to market on Friday with a midpoint distribution yield of 6.25%. The company expects 20% of the distributions to be subject to Federal tax through 2018 and projects a narrow 1.15x Distribution Coverage ratio for 2016, generating $8.6MM of excess cash, while borrowing $42MM to fund growth capital expenditures. The 2016 Pro Forma projects $33.6MM of EBITDA, implying a 20x multiple on the $720MM market cap. The General Partner will receive Incentive Distribution payments which will increase to 50% once the company reaches a quarterly distribution rate of $0.46875, a 48% increase over the initial $0.3125. ASSETS The below table outlines the initial Colorado DJ Basin assets which are backed by dedicated Noble acreage agreements through 2030. Even though these are fixed fee agreements, as highlighted in the second table, the company discloses that there are no minimum volume commitments associated these with these agreements. Such exposure presents risks to investors that a significant reduction in production will impact the ability of the company to maintain their distributions. In 2014, Investment Grade Sponsor Noble Energy operated 9 rigs in the DJ Basin, and currently only 3 rigs are operating. However, this Basin is Nobles lowest cost region which also offers the longest lateral lengths and has been increasing production as indicated in the DJ Performance chart below FIXED FEE, DEDICATED ACREAGE AGREEMENTS, BUT NO MINIMUM VOLUME COMMITMENT GROWTH Noble Midstream Partners expects to offer a "high distribution growth profile" by way of organic volume growth and Right Of First Offer (ROFO) asset drops for which Noble Energy has JV non controlling interests. Such drops will be financing by a combination of debt and equity issuance. As of late, the MLP equity window for secondary issuance has been virtually closed, leading to private unit transactions to fund growth. MARKET COMPS Below are a few comparative units to Noble Midstream Partners, most of which have reported considerably higher distribution coverage over the past twelve months, which reduces the distribution growth risk as a result of lower EBITDA volumes. CONCLUSION While MLP IPO's often allow investors to realize strong distribution growth prior to reaching high split IDR overhead, the uncertainty of lower capital expenditures and production in 2017 and beyond is a risk that is not fully compensated in the midpoint yield in our view. Syndicate buyers are likely going to sell their small allocations to a secondary market with few interested buyers given the depressed prices for high quality units with more significant and diversified drop down EBITDA inventories. MLPData will update Q3 Distributable Cash Flows, Coverage Ratios, Unit Metrics and Guidance shortly after the earning call. Quick Look summaries for select units can be accessed Here Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPData LLC All Data is collected and provided by MLPData LLC
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Nov 13, 2015
Top MLP Shorts
As of Friday 13th, the following are the top MLP short positions, along with the Week to Date and Month to Date total returns. MLPData will update Q3 Distributable Cash Flows, Coverage Ratios, Unit Metrics and Guidance shortly after the earning call. Quick Look summaries for select units can be accessed Here Premium Sub…
As of Friday 13th, the following are the top MLP short positions, along with the Week to Date and Month to Date total returns. MLPData will update Q3 Distributable Cash Flows, Coverage Ratios, Unit Metrics and Guidance shortly after the earning call. Quick Look summaries for select units can be accessed Here Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPData LLC
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Nov 13, 2015
Credit Yield Response
AS MLPs have weakened due to Q3 Management guidance and crude fundamentals, the below table provides a trending view of how creditors assess the risks associated with long term debt. Individual benchmark bond data can be found on the Quote and Chart pages. MLPData will update Q3 Distributable Cash Flows, Coverage Ratios, Unit Metric…
AS MLPs have weakened due to Q3 Management guidance and crude fundamentals, the below table provides a trending view of how creditors assess the risks associated with long term debt. Individual benchmark bond data can be found on the Quote and Chart pages. MLPData will update Q3 Distributable Cash Flows, Coverage Ratios, Unit Metrics and Guidance shortly after the earning call. Quick Look summaries for select units can be accessed Here Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPData LLC
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Nov 05, 2015
Quick Look: Q3 Tallgrass Partners
On Wednesday, November 4th Tallgrass Energy Partners released their Q3 earnings and provided management comments. The Q3 results were reported after Plains All American, which disappointed the market with a flat outlook for 2016 and comments about excess capacity for crude logistics.. Tallgrass Energy provided the market with the following detail…
On Wednesday, November 4th Tallgrass Energy Partners released their Q3 earnings and provided management comments. The Q3 results were reported after Plains All American, which disappointed the market with a flat outlook for 2016 and comments about excess capacity for crude logistics.. Tallgrass Energy provided the market with the following details - Management has a long term outlook, no just the 90 day cycle which investors focus - Strong performance in Crude Logistics from Pony Express from higher transportation revenues on 10% higher volumes, trending higher as of November - Shipper Deficiencies of $8.3MM, (25k barrels per day lower than committed volumes) - $150mm of liquidity available from credit revolver with a low 2.6x Debt/EBITDA ratio - Ready for a bond offering, but awaiting attractive terms - Management expects to exceed EBITDA, DCF and Growth Estimates set at the beginning of 2015 QUESTIONS AND ANSWERS On Distribution Growth going forward? Management expects 20% through 2017, but cautions investor that growth will not be linear On Volume Declines? Management has not seen any indications of decline across their four supply points. Numerous wells drilled but uncompleted and production continues to flow On REX Contract Rollovers? It is contractually full and is adding new capacity for next year. Contracts roll off in 2019 and contract re-negotiations will start in 2018, and management expects all capacity to be contracted, but rates rates are uncertain On Financing and Drops? Final Pony Express drop will be made likely in Q1 2016 and management believes they have debt and revolver alternatives and have been approached for equity issuance. On M&A Options? Bid Ask spread is still too wide, but nearing potential acquisitions, and may announce in next quarter or two On Shippers reselling excess Capacity? Pony is running at full capacity in November, despite MVC deficiencies which are very short term in nature. If it was happening, TEP would not be aware of such arrangements. Is Tallgrass Exposed to Commodity Prices? Only 2% of their EBITDA is exposed via processing contracts. Contracts have a demand and commodity fee component, the former is paid regardless of volumes MLPData will update Q3 Distributable Cash Flows, Coverage Ratios, Unit Metrics and Guidance shortly after the earning call. Quick Look summaries for select units ca be accessed Here Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPData LLC
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Nov 04, 2015
Quick Look: Mgt Speaks, Q3 Plains All American
Plains All American reported their Q3 results on Tuesday (11/3) along with lower guidance for 2015. Below are a few of the highlights: - Q3 Distributable Cash Flows was only .78x and .93x over the trailing twelve months - Q4 midpoint DCF is expected to be $405M, implying Q4 DCF coverage of .93x - Lowered midpoint 2015 EBITDA by $72MM to…
Plains All American reported their Q3 results on Tuesday (11/3) along with lower guidance for 2015. Below are a few of the highlights: - Q3 Distributable Cash Flows was only .78x and .93x over the trailing twelve months - Q4 midpoint DCF is expected to be $405M, implying Q4 DCF coverage of .93x - Lowered midpoint 2015 EBITDA by $72MM to $1950MM - Line 901 Incident resulted in a $65MM charge and $25MM of additional maintenance capex During their Q2 Earnings Call, Greg Armstrong hinted at the scenario of keeping distributions flat in 2016 to maintain 1.0x coverage, and renew growth in 2017 as new projects come online. After the comments, PAA dropped 16% and is trading -5.6% lower as of Tuesday's close. On the 11/4 Q3, Management made the following comments: - Q3 in line, but Negative transportation impacts are accelerating in Q4 2014 - Shippers are overcommited on their volume guarantees, - Lower crude volumes from Permian Basin - No ATM issuance since Jan 2015 - Will need 2016 Equity, but will be less than 2015 $1B - Highly Cautious in 2016, Bullish in 2017+ long term - Management defers to Feb 2016 Guidance due to limited E&P visibility - Looking to reduce 2016 Capex, 25-30% lower than 2015 - Mgt implies less than 1.0x coverage and flat distributions for 2016 DISTRIBUTION AND YIELD HISTORY DISTRIBUTABLE CASH FLOW - Q3 MANAGEMENT GUIDANCE 2015 AS OF Q3 MLPData will update Q3 Distributable Cash Flows, Coverage Ratios, Unit Metrics and Guidance shortly after the earning call. Quick Look summaries for select units ca be accessed Here Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPData LLC
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Nov 03, 2015
Quick Look: Targa Corp Acquires Targa Partners
In what may become a more familiar story, Targa Resource Corp has announced that it will acquire the remaining units of Targa Resoure Partners in order to improve distribution coverage for the combined entity. Here are the highlights of the transactions - Targa Corp (TRGP) will issue .62 shares for each unit of Targa Resource Partners (NGLS),…
In what may become a more familiar story, Targa Resource Corp has announced that it will acquire the remaining units of Targa Resoure Partners in order to improve distribution coverage for the combined entity. Here are the highlights of the transactions - Targa Corp (TRGP) will issue .62 shares for each unit of Targa Resource Partners (NGLS), an 18% premium over 11/2 close - Taxable Transaction to NGLS unit holders - 15% Dividend Growth Expected in 2016, 10% growth from 2015 to 2018 - 1.1x - 1.2x Dividend Coverage - $600MM of 2016 Capex The main driver to the transaction is the elimination of the Incentive Distribution Rights paid from NGLS to TRGP, which $161MM over the past twelve months MLPData will update Q3 Distributable Cash Flows, Coverage Ratios, Unit Metrics and Guidance shortly after the earning call. Quick Look summaries for select units ca be accessed Here Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPData
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Oct 31, 2015
Q3 Quick Look: Enterprise Products Partners
On October 29th, Enterprise Products Partners held their Q3 earnings call to review the quarter's performance. Here are a few highlights from the commentary and Q&A: - If EDP had maintained IDR 's since 2010, EDP would have paid GP $6B with an implied Q3 coverage of 0.7x - Mgt comments "We see alot of opportunities in this environme…
On October 29th, Enterprise Products Partners held their Q3 earnings call to review the quarter's performance. Here are a few highlights from the commentary and Q&A: - If EDP had maintained IDR 's since 2010, EDP would have paid GP $6B with an implied Q3 coverage of 0.7x - Mgt comments "We see alot of opportunities in this environment just as we have in other periods when markets have been disrupted" - $7.8B of capital projects under construction supported by long term end user agreements, which commence in 2017 - $4.7B of available liquidity, only $68MM of ATM issuance - 2016 Growth Capex expected to range from $3.2B to $3.5B - Developing more assets in Permian Basin, where 30% of all US rigs are deployed, with the building of two new processing plants and takeaway expansion - Management does not see a fall off in 2016 NGL Volumes - Increasing LPG Export demand from Asian Companies - Diversified set of assets produced higher volumes and EBITDA Volumes Operating Income ( Enterprise Products Distributable Cash Flows MLPData will update Q3 Distributable Cash Flows, Coverage Ratios, Unit Metrics and Guidance shortly after the earning call Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPDa
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Oct 28, 2015
MLP Short Interest
Below are the most recently reported changes in short interest. Energy Transfer Equity and Cheniere had the largest absolute change. Short interest data can be found in the Quote tab for all Master Limited Partnerships
Below are the most recently reported changes in short interest. Energy Transfer Equity and Cheniere had the largest absolute change. Short interest data can be found in the Quote tab for all Master Limited Partnerships
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Oct 27, 2015
This MLP Should Not Be
Presenting to a standing room audience at the National Association of Publically Traded Partnerships in May 2014, Hi-Crush Partners presented investors the slide below, suggesting that Take or Pay agreements would provide strong DCF growth into 2015. Just 17 months later, Hi-Crush Partners announced the suspension of their distribution…
Presenting to a standing room audience at the National Association of Publically Traded Partnerships in May 2014, Hi-Crush Partners presented investors the slide below, suggesting that Take or Pay agreements would provide strong DCF growth into 2015. Just 17 months later, Hi-Crush Partners announced the suspension of their distribution due to the precipitous drop in frac sand prices in Q3, with lower prices expected in Q4, which will further stress their debt covenants. The company reported 3.794MM tons of sand sold, on pace to exceed the 4MM tons mentioned in 2014, but at a price point which fell from $70 to $57/ton from Q2 2014 to Q3 2015. While no one could have predicted the current state of the industry, Investors who read the 10Q's were likely comforted by the following disclosure: These Take or Pay agreements were not the assets investors thought they were, and when things got tough, management opted to modify these agreements to maintain good client relationships, which clearly has not protected unit holders from the destruction of both their principal and income. For that reason alone, Hi-Crush Partners is ill suited to be a yield instrument, regardless of whether crude recovers. MLPData will update Q3 Distributable Cash Flows, Coverage Ratios, Unit Metrics and Guidance shortly after the earning call Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPData LLC
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Oct 26, 2015
Credit Yields Down
As unit yields moved higher this past week, the average basis on midstream credits tightened. Charts can be found here by selecting Bond vs Distribution yields MLPData will update Q3 Distributable Cash Flows, Coverage Ratios, Unit Metrics and Guidance shortly after the earning call Premium Subscribers can access Weekly Fund Flow…
As unit yields moved higher this past week, the average basis on midstream credits tightened. Charts can be found here by selecting Bond vs Distribution yields MLPData will update Q3 Distributable Cash Flows, Coverage Ratios, Unit Metrics and Guidance shortly after the earning call Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPData LLC
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Oct 22, 2015
Q3 Quick Look: EQT Midstream Partners
Prior to market open on Thursday, October 22nd, EQT Midstream announced the following results - Reiterate 20% Distribution Growth through 2017 - 82% of revenues generated from firm reservation fees - 1.63x Q3 Coverage on Declared Q3 Distributions, 1.75x TTM - Operating Cash Flow coverage 1.29x - Volume increases in Transmission and…
Prior to market open on Thursday, October 22nd, EQT Midstream announced the following results - Reiterate 20% Distribution Growth through 2017 - 82% of revenues generated from firm reservation fees - 1.63x Q3 Coverage on Declared Q3 Distributions, 1.75x TTM - Operating Cash Flow coverage 1.29x - Volume increases in Transmission and Gathering - Increased low end of 2015 Adjusted EBITDA Guidance - Management prioritizes growth over Sponsor drop downs - $62MM ATM raised, majority from one trade VOLUME TABLE GUIDANCE MLPData will update Q3 Distributable Cash Flows, Coverage Ratios, Unit Metrics and Guidance shortly after the earning call Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPData LLC
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Oct 21, 2015
Quick Look: Kinder Morgan
We realize that Kinder Morgan is no longer an MLP, but it certainly is still a proxy for the state of the midstream market. and available capital. Here are a few key items from the Earnings Call Q&A held after the close on Wed, October 21st: - Increased Distributions from $0.49 to $.51 - Lower 2016 Distribution growth is lowered from…
We realize that Kinder Morgan is no longer an MLP, but it certainly is still a proxy for the state of the midstream market. and available capital. Here are a few key items from the Earnings Call Q&A held after the close on Wed, October 21st: - Increased Distributions from $0.49 to $.51 - Lower 2016 Distribution growth is lowered from 10% at time of Fusion, to 6 to 10% and maintain + 1.0x coverage - Management believes the market is paying a premium for coverage over growth - No need to raise equity through middle of 2016 and can extend that date if necessary, Management would not comment on the source - Northeast Direct will benefit from recent New England Nuclear Shutdowns and Regulatory approvals - Tax Benefit extended to 2020, will not be a "Significant Federal Taxpayer" until then - M&A opportunities in Asset Deals (less than $1B); Valuation is stlll too high for bigger deals; Corporate deals are more difficult and unpredictable EBITDA Segment Performance Below: - MLPData will update Q3 Distributable Cash Flows, Coverage Ratios, Unit Metrics and Guidance shortly after the earning call Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPData LLC
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Oct 08, 2015
MLP Shorts and Returns
The following table compares the change in Short Interest for the units with the highest number of short interest shares, with the Week to Date and Month to Date Total Returns. Short interest for units can be found in the Quote tab Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Me…
The following table compares the change in Short Interest for the units with the highest number of short interest shares, with the Week to Date and Month to Date Total Returns. Short interest for units can be found in the Quote tab Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPData LLC
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Oct 01, 2015
MLP Short Interest Performance
The Below Table tracks the units with the highest number of short sold shares, the change from the previous month, and the Week to Date Total Return Don't let the Markets Fool You, be informed with MLPData's Premium Subscription Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Me…
The Below Table tracks the units with the highest number of short sold shares, the change from the previous month, and the Week to Date Total Return Don't let the Markets Fool You, be informed with MLPData's Premium Subscription Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPData
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Oct 01, 2015
So What Just Happened to MLPs?
On Wednesday (9/30) the benchmark index bounced back 8.79% after a brutal slide, leaving units down -3.4% for the week so far. So what just happened? At MLPData, we run various scans and filters to find articles and insights related to Master Limited Partners, to understand how retail investors may be influenced. This past week, an article from…
On Wednesday (9/30) the benchmark index bounced back 8.79% after a brutal slide, leaving units down -3.4% for the week so far. So what just happened? At MLPData, we run various scans and filters to find articles and insights related to Master Limited Partners, to understand how retail investors may be influenced. This past week, an article from an subscription newsletter author, wrote an article broadly republished with the provocative title "Warning: The Master Limited Partnership Model Might Not Survive". Barron's republished the article with an even more alarming titled "Why the MLP Model Might Be a Goner", in which it referenced the original article as insights from a money manager, which differ's from the authors own bio on their site, a minor difference to some we suppose. These two articles, perhaps coincidentally, added fear to an investor base searching for confidence after Energy Transfer's announcement on Monday. Sell first and ask questions later appeared to guide many investors on Monday and Tuesday, leading to a dramatic markdown of MLP values. No new information was offered to investors, just the fear that cuts were imminent and future cash flows available for distribution would at best be lowered, and perhaps eliminated. Make no mistake, the future growth of midstream cash flows is at risk as volumes likely decline and producers require lower costs to survive. This week's panic exceeded the worst case scenario, at least for 2016. On Wednesday, the market refocused on the carnage, with units recovering some of the week's losses. As a rebuttal to the negative articles, CBRE's Hinds Howard offered another view on the future of Master Limited Partnerships, aptly titled "The MLP Business Model Will Survive" Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPData LLC
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Sep 30, 2015
Credit vs Unit Yields
Below is a subset of the MLPData Universe, which shows the September change in credit yields, unit yields, unit Month to Date Total Returns, and Trailing Twelve Month Coverage Ratios Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfoli…
Below is a subset of the MLPData Universe, which shows the September change in credit yields, unit yields, unit Month to Date Total Returns, and Trailing Twelve Month Coverage Ratios Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPDa
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Sep 29, 2015
Expecting something better from Energy Transfer's Acquisition of Williams Inc?
For months, Investors in Master Limited Partnerships have been warned that the market was ripe for Mergers and Acquisitions, where weaker units would be consolidated into a more credit worthy sponsor, leading to higher and more stable distribution growth. The long awaited culmination to the Williams Inc strategic review came to a close Monday morn…
For months, Investors in Master Limited Partnerships have been warned that the market was ripe for Mergers and Acquisitions, where weaker units would be consolidated into a more credit worthy sponsor, leading to higher and more stable distribution growth. The long awaited culmination to the Williams Inc strategic review came to a close Monday morning when Energy Transfer Equity announced that they were acquiring Williams through a fairly complicated transaction. If you were looking to the news improving your fortunes, that did not happen, at least not yet. Just being exposed to energy and debt was a reason to trade down today, but Energy Transfer, and Williams, were both sharply lower by the doubts assigned to the $2B of synergies and $5B of capital need to realize those annual synergies by 2020. Not sure what the market was expecting other than a higher price, but it sure did not think much of this transaction, from either side of the table. One item most people assumed correctly is that Williams Partners will be left as a stand alone LP. Even this expected news sent WPZ lower -6.12% on 4x the average 90 day volume. Let's first explain the tax free transaction and then we will list the concerns expressed during the Q&A. The proposed deal, subject to Williams shareholder approval, expected to close by the second half of 2016, will first create a new C-Corp, which will trade under the ticker ETC, designed to closely track the performance of ETE, which is structured as an MLP. The ETC instrument is expected to appeal to a wider set of institutional investors, who otherwise would refrain from acquiring stakes in Master Limited Partners. As a current Williams Inc shareholder, you will have the option to receive 1.8716 shares of the newly issued ETC for each WMB share owned, or a $8.00 and 1.5274 ETC shares, subject to a pro rated cash cap. Williams Shareholders will also receive a special $0.10 dividend, payable immediately prior to the closing in mid 2016. Williams Inc will also be making a $428MM breakup payment to Williams Partners, which is expected to be distributed to unitholders likely as UBTI. Once ETC is listed, the distribution of ETE (K-1 income) will be identical to that of ETC (1099 Income), through 2018. The ETC share will trade with a Contingent Consideration Right, which will ensure that there is no premium or discount between ETE and ETC during over the course of a two year period. If a discount did exist under their calculation rules, a cash or equity payment will be made at the end of the measurement period. So here are some of the key points highlighted by Energy Transfer which are expected to benefit shareholders: - $2B of EBITDA Commercial synergies will be realized by 2020 on a run rate basis - $300-$400MM of Operating Cost synergies to be realized by 2017 on a run rate basis - ETE on the path to investment grade credit rating - Investment Grade LP's will provide ETE with an increasing level of IDR payments. Below is the chart of how the LP's have performed over the past year, which illustrates the LP financing challenges for new asset drops. On the Conference call, below are a number of concerning topics posed to Kelcy Warren and Jamie Welch Synergies: Q: What is your confidence in achieving the synergies and where may they be realized? A: Our confidence is very high as we have been working very closely with the Williams management team over the past several months...we expect a significant portton of the $2B to be realized in the Appalachian Northeast where there is a significant opportunity for Liquids capital efficiencies Capital Expenditures: Q Where will the $5B be spent and can you execute your plan in light of the capital markets? A: It will be mostly in the Northeast...yes, despite current volatility, we have a blueprint to execute through the end of 2016...WPZ also has a plan to ensure that projects are executed through 2016 Dilution: Q Why was more cash not offered vs equity? A We spent alot of time with the rating agency and Williams and we did not want to put the credit rating at risk, further, our financing cost is much lower than our cost of equity, so we chose this plan Credit Rating: Q When will ETE realize investment grade credit? A: 2017 would be ideal if we execute On Simplicity Q This transaction seems to make ETE more complex and suggests the parts are trading at a discount, are there any plans for simplicity? A We have seen a very steep decline in our sector, our view is that this is the best structure to move forward. There is a large overhang in our sector, with much upside. From Complication comes Value With the market fixated on the expectation of lower production, tighter credit and a very narrow equity window, it may be a while before Energy Transfer trades in line with the synergies management has outlined, the majority of which will not be material until 2018. - Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPData LLC
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Sep 26, 2015
Does Issue Date impact MLP Performance?
Given the recent rout in Master Limited Partnerships, we wanted to consider whether seasoned MLP's, those issued prior to 2008, have performed any better than those issued after 2010 (there was a two year hiatus in issuance from after the 2008 crash). The question is whether the more significant tax recapture associated with older units, which hav…
Given the recent rout in Master Limited Partnerships, we wanted to consider whether seasoned MLP's, those issued prior to 2008, have performed any better than those issued after 2010 (there was a two year hiatus in issuance from after the 2008 crash). The question is whether the more significant tax recapture associated with older units, which have paid out a higher amount of aggregate distributions for those who have owned since inception, has had any impact on retail selling Year and Month to Date Total Returns. We stratify the MLPData universe by exchange listing date below and display the table for units issued prior to 2008. In summary, the $313B market cap of issuance prior to 2008 has an average Year to Date Total Return performance of -23.14% and a Month to Date total Return Performance of -11.67%. For the $200B of units issued after 2010, the YTD number is -25.40% and MTD is -16.77%. There are many other obvious factors to consider along with this data, but on the surface, but it appears that seasoned issues are less likely to be liquidated in this downturn than those with a longer ownership period, and lower tax obligations upon sale. The next table is issuance from 2010 to 2013 And the final table is issuance from 2013 Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPData LLC
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Sep 26, 2015
The 2008 MLP Crash vs Present
MLP investors are looking for any insight to better understand recent market events and whether the future fundamental outlook is properly reflected in current valuations. To that end, we took a quick look a the change in credit yields for the month of September 2015 and compared to the change in unit prices during the same period. Apart from two…
MLP investors are looking for any insight to better understand recent market events and whether the future fundamental outlook is properly reflected in current valuations. To that end, we took a quick look a the change in credit yields for the month of September 2015 and compared to the change in unit prices during the same period. Apart from two upstream units which cut and suspended their distributions, the change in credit yields have been between with -1% and 1%. The majority of unit prices have declined from -10-25% as investors have dumped shares based upon the expectation of broad distribution cuts. Bond holders do not feel that their risk has increased. In 2008, the credit market deteriorated rapidly, which sent unit shares plummeting. Of course, the credit crunch was not specific to energy prices or production, but it nonetheless impacted MLP's more so than other sectors, for reasons unrelated to market fundamentals. Lets first look at 2008 and what happened to credit yields. The Enterprise Products chart below indicates credit yield from September 2nd 2008 to October 16th, 2008, where the yields increased 358 bps to 10.46%, returning back to the previous yield by July 2009. Over the course of 11 months, yields ranged from 6.92% to 10.86%, a period in which EPD raised their quarterly distributions by 1.4%, or 6.2% over the full period. Crude hit a low on 12/19/09 at $39.7, but just 10 months later, was trading at $78, a near double from the low. During this period where the price of crude crashed, production dropped nearly 35% from 5.16MM bpd to 3.38MM bpd, only to recover 60 days later to 5.18MM bpd Finally, during this same period, the units of Enterprise Products fell from $15 to a intraday low of $8, and took almost 8 months to recover back to the $15 level For those looking back at 2008 as a reference point for the MLP crash of 2015, the similarities are few other than investors panicked and dumped units before any potential fundamental impact was realized by any Master Limited Partnership. Despite oil production rebounding quickly, and credit markets returning to expected risk premiums, the recovery in unit prices occurred over a much longer time frame, which may be the most important similarity between 2008 and the present market Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPData LLC
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Sep 19, 2015
Key Points from 2015 Investing in MLP Conference
This past week, MLPData sponsored our first conference exclusively dedicated to Registered Investment Advisors, Wealth Managers and Family Offices. Given market events, the timing enabled investors to gain deep insight into relevant industry topics unfolding in our low commodity price environment. The following summarizes a few of the key points…
This past week, MLPData sponsored our first conference exclusively dedicated to Registered Investment Advisors, Wealth Managers and Family Offices. Given market events, the timing enabled investors to gain deep insight into relevant industry topics unfolding in our low commodity price environment. The following summarizes a few of the key points discussed throughout the conference by the panelist, which consisted of Fund Managers, Tax and Indusry Experts, MLP Management, and RIA's managing MLP allocations: What to Expect in 2015 and 2016: Most panelists agreed that they expect to see volatility and perhaps more downside risk as Fall credit redeterminations take place, creating headlines of E&P distress, along with the potential for small and peripheral MLP's to announce distribution cuts in December. These risks are unrelated to MLP fundamentals, but rather reflect market sentiment where units are being sold without asking questions. 2016 is considered the year of opportunity if investors are able to pick up oversold units in the Q4 of 2015. Estimates are that US production will fall between 250k and 900k bpd before the end of year, allowing the market to re-balance and stabilize crude in the $50-$60 range. Although volume reductions are not what MLP investors would hope for, operators can build budgets and infrastructure around higher prices, which will lead to growth projects. Bankruptcy Risk of Take or Pay Contracts: With looming announcements of E&P bankruptcy, exemplified by this week's announcement of Samson's pre-packaged Ch 11 bankruptcy filing, the audience was looking for insight into how might a Midstream operator be impacted if a take or pay customer were to declare bankruptcy. Panelists responded by describing that each Bankruptcy filing could be different, but the midstream operator will have a period of uncertainty regarding their contract terms. However, the expectation is that to the extent there are Ch 11 filings by customers of midstream services, these filing will not result in the customer terminating operations, but more likely addressing their balance sheet and continuing to require the midstream services. Those who are more captive to limited midstream alternatives will have the least amount of leverage to alter their take or pay commitments in the event of bankruptcy filing. Although there were many questions about this topic, the panel did not expect bankruptcy driven take or pay reductions to have a material impact on 2016 cash flows,, and the headline risks were more worrisome than the actual impact. The impact of Fund Flows: There is no question that the recent performance of MLP's have been driven by the plethora of new Closed End Funds, Mutual Funds and ETF's which have been launched since 2010, raising over $30B in new capital to soak up MLP equity issuance and increase demand for units. Those flows have since shifted and have turned modestly negative as retail investors liquidate energy exposure. However, several fund managers mentioned the strong inflows related to new institutional money which may be indicating that MLP's have hit bottom. Raising Capital: MLPs usually fund new projects with 50% equity and 50% debt, the former of which is nearing 10% for many units, and even higher when considering the impact of IDR's. At a double digit cost of equity financing, few new projects look attractive when considered Return on Invested Capital. Recent new issuance have not been well received, increasing yields further. Some Management teams are faced with reducing distributions if the market does not value their units in line with the assumption of no distribution cuts. Accessing the public markets for equity issuance will likely be a last resort to sponsor financing and private equity, the latter of which reportedly is near $20B of available capital awaiting opportunity. Premium Subscribers can access Weekly Fund Flows Here Premium Subscribers can access Risk Metrics Here Premium Subscribers can Monitor Portfolio Income Here Premium Subscribers can access Guidance and Forecast Changes Here Do You Want to Become a Premium Subscriber? Please Register Here Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPData LLC
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Jul 21, 2015
Safe Haven Units Now at Risk
It has been a challenging 11 months for MLP investors and the benchmark index has fallen over 25% with the prospect of higher rates and weaker energy prices by the end of the year. As organic growth projects have become more difficult to find anchor sponsors, mergers and acquisitions have been the answer for some MLP's to develop growth opportunit…
It has been a challenging 11 months for MLP investors and the benchmark index has fallen over 25% with the prospect of higher rates and weaker energy prices by the end of the year. As organic growth projects have become more difficult to find anchor sponsors, mergers and acquisitions have been the answer for some MLP's to develop growth opportunities in the future. On July 13th, Marathon's MPLX announced the acquisition of MarketWest Energy Partners, indicating a 32% premium from the prior close. Investors had no chance to realize such a premium, as MPLX sank 15% after the announcement, and closed out the week 19.45% lower, leaving MarketWest unit holders with a paltry 9.5% equity premium and a one time cash payment of $3.37, for a total 13% premium. So how did 19% of the premium evaporate over the 5 days since the announcement? For starters, MPLX unit holders had assumed they purchased a high growth (25% 3 year CAGR) LP which would financially engineer growth by dropping chunks of the $1.6B of MPC EBITDA assets down into the LP, using their balance sheet to finance the transactions. After the announcement, MPLX management projected a 29% growth rate for 2015, and >= 25% through 2017, and then "peer leading" thereafter. The previously financially engineered growth rate has now likely been reduced, and the lower rate is now subject to greater risk from the new asset base. Further, the combined company will now be paying 50% of all incremental distributions as Incentive Distribution Rights payments to Marathon Petroleum, the owner of the General Partner and IDR's. The 217MM new units of MPLX will also be incrementally paying IDR fees to MPC, which were not burdened previously by MWE's lack of IDR's. If the deal is completed in Q4 as previously announced, MarkWest Energy unit holders will be receiving cash roughly equivalent to difference between the MWE and MPLX per unit distribution rate, after adjusting for expected growth, for the next two years (currently MPLX pays out $1.64 and MWE $3.64 per unit). By 2017, the MPLX distribution rate should be $3.06 per unit, a 15% reduction from the current MWE distribution rate. One has to add back the lower risk, lower cost of capital and higher forward growth rate, which over the longer term (2017-2020), should lead to both higher income and total returns for MarkWest Unit holders. The same cannot not be said for MPLX unit holders, who have been punished with a 19.5% discount to their closing value prior to the announcement. Making the future less certain is the higher number of units, and their associated IDR burden of 50%. Together, MPLX investors are facing a lower growth, higher risk MLP than they owned prior to the announced acquisition, which is a game changer for total return investors who have found relative safety by investing in the sponsored drop down units in the table below. MLPData is in the final stages of developing a broader set of content and applications to help investors select, manage and monitor their yield and total return investment objectives. In the next two weeks, MLPData will be offering a new set of premium subscription features and will continue to maintain free access to a subset of the content. If you have data or application suggestions for MLPData, please share it with us here Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPData LLC
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Jun 04, 2015
IPO Preview: PennTex Midstream Partners
Natural Gas gathering and processing has been an out of favor asset class over the past twelve months as most units have announced lower growth rates on declining volumes and reduced capital expenditures. However, PennTex Midstream Partners, a new Master Limited Partnership with dedicated acreage commitments from Memorial Resource Development, wil…
Natural Gas gathering and processing has been an out of favor asset class over the past twelve months as most units have announced lower growth rates on declining volumes and reduced capital expenditures. However, PennTex Midstream Partners, a new Master Limited Partnership with dedicated acreage commitments from Memorial Resource Development, will be pricing their IPO on Thursday with a midpoint price of $20 and target yield of 5.5%. When compared to the peer group, PTXP will offer investors strong coverage and the expectations of best in class distribution growth through 2018. While the above table indicates the lack of total return associated with gathering and processing, PennTex operates in the highly profitable Terryville complex of northern Louisiana across several zones in the Cotton Valley formation. NGP, the primary Sponsor, has an ownership interest in Memorial Resource Development (MRD), which is the core tenant for the new assets. MRD, which came public in June 2014, is currently trading at the same price as their close on the IPO date. The Assets The initial assets include the Lincoln Parish Plant, a 200MMcf/d cryogenic natural gas processing plant along with a 35 mile gathering system and a 1 mile gas pipeline for market access to residue natural gas from the plant. Additionally, the company will be completing a second plant in Mt Olive, which also will process 200MMcf/D of gas connected to a 40 mile NGL pipeline, which will have the capacity to move 36,000 barrels per day of plant output to third party pipelines. A 14 mile residue pipeline will also support access to the residue natural gas processed from the plant. In total, these two plants will have 400 MMcf/d of processing capacity of which 300 MMcf/d is contracted by Memorial Resource Development under Minimum Volume Commitments. MRD owns 68,000 acres in the Terryville Complex, and currently operates 8 rigs across 52 horizontal wells, yielding 227 MMcf/d, and expects to spend 100% of their $500MM capex budget in this region. The below illustration indicates that MRD realizes the highest IRR's in the Terryville region: Growth The Management team has projected "best in class" distribution growth from their peer group, which presently implies a ~ 15% CAGR. The company expects to achieve this growth by processing a higher volume of gas from MRD prior to July 2016 as indicated in the following table. After July 2016, MRD's minimum volume commitment will increase to 100% of the capacity of the two plants. The company also expects to develop and acquire new assets from NGP and benefit from further MRD drilling in the Terryville region Conclusion PennTex Midstream Partners will offer investors a 5%+ yield with 15% growth through 2018 with a target coverage ratio of 1.08 and capital expenditures funded by operating cash flows. The future growth is highly dependent upon MRD expanding their rigs and wells in the region, and proven EBITDA drop down assets appear to be limited. Distributions will need to increase by 25% in order for the GP to realize the top tier distribution split of 50%. The below chart indicates a target price closer to $24, which is a 20% increase over the IPO price. MLPData is in the final stages of developing a broader set of content and applications to help investors select, manage and monitor their yield and total return investment objectives. In mid June, MLPData will be offering a new set of premium subscription features and will continue to maintain free access to a subset of the content. If you have data or application suggestions for MLPData, please share it with us here Comments or Questions for MLPData? Please respond here All Data is collected and provided by MLPData LLC
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May 02, 2015
IPO Preview: Tallgrass Energy GP
In the latest chapter in the development of the Tallgrass corporate structure, Tallgrass Energy will launch their General Partner, Tallgrass Energy Partners GP, an LP which will own 20MM units of TEP and 100% of the Incentive Distributions Rights derived from the Limited Partner. TEGP will issue 35MM public units, representing 22% of GP ownership…
In the latest chapter in the development of the Tallgrass corporate structure, Tallgrass Energy will launch their General Partner, Tallgrass Energy Partners GP, an LP which will own 20MM units of TEP and 100% of the Incentive Distributions Rights derived from the Limited Partner. TEGP will issue 35MM public units, representing 22% of GP ownership, for $900MM. Launched in May 2013, Tallgrass Energy Partners LP has been one of the top performing MLPs with an impressive track record of distribution growth as illustrated below When compared to other high growth midstream MLP's, TEP presently has a 200bps spread to it's peer group due to their smaller EBITDA inventory and modest leverage. TEP's initial IPO yield was 5.6%, rewarding unitholders who waited for the growth story to develop and become transparent to the market. Tallgrass Energy GP will pay out $0.624 over the next twelve months, implying a forward midpoint target yield of 2.45%, for which the C-corp company expects to report no federal income tax on 1099 distributions through 12/31/2017. Tallgrass Development will continue to control the GP through 77% ownership of Class B shares, which will not receive distributions, but will have majority voting control . In 2015, the cumulative IDR payments are expected to be just $4.9MM, but the company has reached the high split IDR of 50%, which certainly was one of the key triggers for the IPO. The 2.45% forward target yield will position TEGP as one of top three GP units when considering yield plus growth as shown below The Assets Apart from the 20MM unit of ownership in TEP, the only other asset which TEGP will own is the IDR rights to receive 50% of the incremental distributions above $.04313 for each outstanding LP unit. TEGP will benefit from both the issuance of new TEP units to fund future drop downs from their sponsor, as well as the increase in TEP distributions to unit holders Management expects TEP to grow distributions by 20% through 2017 and has raised $900MM from the issuance of new units to fund dropdown in order to grow distributions,. At a 9x EBITDA multiple, TEP will need to issue over $2B of new units to finance future drop downs assuming 50% equity financing. Clearly TEGP is in the early stages of rapidly growing their IDR payments with a transparent plan for growth. Future Growth Given their 77% interest in TEGP, Sponsor Tallgrass Development is motivated to further grow TEP by way of incubating new assets for future drop down to the LP. Presently, the sponsor has $500MM of EBITDA dropdown inventory to sell to TEP, along with new projects under development. The existing EBITDA inventory consists of ownership interests in the Pony Express and Rocky Express Pipeline, the former of which is majority owned by TEP. Summary TEGP will offer total total return investors +25% under a flat interest rate scenario which will be well protected in the case of a rising rate environment. While the backlog is considerably smaller than it's peer group of similar yield and growth units, the management team has proven capable of growing their asset base with very high quality and accretive projects. Further, TEGP will enable public unitholders to participate in any future takeover premium, an often elusive benefit available to public LP holders.
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Apr 29, 2015
IPO Preview: Enviva Partners
Many investors may not think that wood pellets for power generation would be regarded as qualified income for the purposes of MLP ownership, but the IRS issued a Private Letter Ruling in 2011 confirming that such assets would indeed qualify, setting in motion the path for the IPO of Enviva Partners LP (EVA), expected to price on 4/29. Enviva wi…
Many investors may not think that wood pellets for power generation would be regarded as qualified income for the purposes of MLP ownership, but the IRS issued a Private Letter Ruling in 2011 confirming that such assets would indeed qualify, setting in motion the path for the IPO of Enviva Partners LP (EVA), expected to price on 4/29. Enviva will offer investors the opportunity to buy units in the largest producer of wood pellets for power generation with a target yield of 8.25% at midpoint pricing of $20 and target distribution coverage of 1.15x. Only 20% of the distributions will be subject to federal income tax, if held through 2018. The company has been the pioneer in developing an enterprise logistics system which aggregates wood from the 75 mile radius around four plants, enabling foreign buyers to enter into long term take or pay contracts, which guarantee supply. Such contracts are critical for the investment necessary by power generation owners to switch from coal to pellets. Although there are over 170 pellet manufactures just in the US, none have the scale and logistics infrastructure to export large volumes of pellets. Demand for such pellets are being driven by two factors; (1) the EU's 2020 regeneration targets, which call for an increase in power generated from renewable sources; (2) the significant relative cost advantage wood pellets has over wind and solar Similar to the value chain associated with oil and gas, Enviva has developed their own analogous diagram to help investors understand and appreciate the competitive barriers the company has developed over the past 5 Years The Assets Enviva owns five production plants which produce 1.7MM metric tons per year of wood pellets, which are contracted to EU power generation companies under, Dollar denominated, take or pay contracts, for 100% of their current production capacity through 2017. The Partnership will also own a dry bulk deep water terminal at the Port of Chesapeake, which reduces their shipping costs and controls their inventory flow. Growth The Sponsor, Riverstone Fund, has created a JV with the Hancock Natural Resources Group, to develop new plant capacity which can be dropped down to Enviva. Presently, the Sponsor and the JV are in development of three new plants which are expected to create $58MM of incremental annualized EBITDA within the next three years. The drop downs are expected to be valued at 7-8x EBITDA once the cash flows are established. The top IDR split is roughly 50% higher than the MQD of $0.4125, which implies that LP investors will receive $2.57 (vs the $1.65 MQD) if the company reaches this split as a result of the $58MM in drop down EBITDA and other growth initiatives outlined below. Conclusion Enviva will offer investors unique access to a potentially high growth asset class with no commodity price risk. However there are unique risks related to the relatively short take or pay contacts and alternative regional suppliers. The company disclosed that only 50% of the current total production capacity is presently contracted after 2017, which roughly equates to their MQD distribution rate. Growth is predicated upon the completion of new assets and the ability to realize the forecasted EBITDA, for which the company has a strong record of delivering projects within budget. Income investors should add Enviva to their portfolio for 3 year holding period and realize the 80% tax shield on an 8.25% yield with a target total return of 18% per annum.
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Feb 01, 2015
IPO Preview: Columbia Pipeline Partners
Since the Thanksgiving Day announcement that OPEC would maintain production, only one new Master Limited Partnership has come to market. On December 17th, Rice Midstream Partners priced below the $20 midpoint at $16.50, and has since fallen to $13.81 yielding 5.35%. Antero Midstream Partners, which priced above the $20 midpoint range on November…
Since the Thanksgiving Day announcement that OPEC would maintain production, only one new Master Limited Partnership has come to market. On December 17th, Rice Midstream Partners priced below the $20 midpoint at $16.50, and has since fallen to $13.81 yielding 5.35%. Antero Midstream Partners, which priced above the $20 midpoint range on November 5th and opened at $30.36, has since fallen below the IPO price with a target yield of 3%. Both of these units were brought to market with "best in class" distribution guidance from the respective management teams. In spite of the further weakness in crude, natural gas and liquids, the market has responded by paying a premium for investment grade sponsored units which clearly outline the path to transparent double digit distribution growth. The below chart illustrates the post Thanksgiving performance of Shell Midstream Partners, Valero Energy Partners, Phillips 66 Partners, Marathon's MPLX LP, and Dominion Midstream Partners. Seeking to follow in these footsteps, NISource is in the process of a restructuring for Columbia Pipeline Group, which will separate the assets and the GP structure from NISource in a tax free transaction expected to occur by July 2015. Once separated, CPG is expected to generate $680MM of adjusted EBITDA inn 2015 with an investment grade credit rating. The first step to the restructuring is the IPO of newly formed Columbia Pipeline Partners (CPPL), majority owned by CPG, expected to price the week Feb 2nd. The MLP will not own the assets directly, but rather will have a stake in the OpCo, which will own the assets and equity finance $4.9B of organic growth by the end of 2018. The legal structure is shown below which provides a clear path for the GP to become public in the future. Columbia Partners expects to price 40,000,000 units between $19 and $21 paying out a Minimum Quarterly Distribution of $0.67 with an implied midpoint yield of 3.35%. The distributions are subject to Incentive Distribution Rights, which pay the General Partner an increasing rate of distribution as the LP distributions increase. Management is projecting best in class distribution growth, which implies +25% 3 year CAGR distribution growth with a target coverage ratio of 1.1x. Below is the peer group of comparable yields and forecasted distribution growth The Assets The operating assets will be owned by an OpCo, for which Columbia Pipeline Partners initially will own a 14.6% interest. In 2015, OpCo's adjusted EBITDA is expected to be $680MM, of which $99MM will be allocated to CPPL. The OpCo will own the following FERC Regulated Interstate Pipelines, Storage Assets and Gathering and Processing infrastructure The chart below illustrates the long term stability of the present revenues. The key asset, Columbia Gas Transmission, is essentially operating at full capacity and contributes 60% of the company's forecasted Distributable Cash Flows Growth Opportunities Management expects to achieve +25% distribution growth by organically expanding the OpCo assets and increasing CPPL's ownership in OpCo. Columbia's organic expansion within the Marcellus and Utica regions, expected to be $4.9B in aggregate by the end of 2018, is backed by long term and binding precedent agreements. CPPL will expand ownership in OpCo by acquiring equity issued to finance the expansion projects. Management expects to more than double the asset size of OpCo by 2018, and more than triple the size by 2020, which will require nearly $10B of new capital to fund the expansion, financed primarily by equity issuance according to the roadshow presentation. In addition to the projects underway below, there is the potential for further expansion from the Mountaineer Express project, a multi-billion dollar pipeline investment presently seeking producer commitments. Summary Columbia Pipeline Partners will offer investors double digit returns by increasing ownership of an expanding OpCo asset set, backed by diversified long term cash flows with minimal (less than 10%) volume or commodity price risk. While the growth rate is similar to that of Shell Midstream, Valero Partners, MPLX and Dominion, the EBITDA inventory will be lower than the peer group, and will require development through 2020. Further, CPPL and OpCo will require access to equity markets to finance their roughly $5B of expansion over the next three years. We expect CPPL to trade with a 2.80% yield implying a target price of $24.00, about 20% above the IPO midpoint range. Comments or Questions for MLPData? Please respond here We will be launching a membership service in mid February, which will provide access to Premium and Exclusive content. If you have data or application suggestions for MLPData, please share it with us here All Data is collected and provided by MLPData LLC
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Dec 13, 2014
Rice Midstream Partners IPO Preview
Since the last MLP IPO, Antero Midstream, the benchmark index is down 22% as the crude crash has spurred investors to dump their energy exposure while crude searches for a bottom and forecasted capital expenditures are readjusted. Despite the broad market decline, Antero and the other recent IPOs, CONE Midstream Partners, Shell Midstream, and Domi…
Since the last MLP IPO, Antero Midstream, the benchmark index is down 22% as the crude crash has spurred investors to dump their energy exposure while crude searches for a bottom and forecasted capital expenditures are readjusted. Despite the broad market decline, Antero and the other recent IPOs, CONE Midstream Partners, Shell Midstream, and Dominion Partners, have performed relatively better, likely due to a combination of savvy investors and no risk associated with current and near term distributable cash flows. Rice Energy is looking to launch Rice Midstream Partners through this narrowing, if not closed, window of opportunity, with pricing expected on December 17th. RMP will have quite a few similarities with their IPO peer group. A strong set of gathering and processing assets with long term dedicated acreage contracts and no short term commodity price/volume exposure with organic volume driven growth. Gathering and Processing services are contracted on a long term dedicated acreage basis where service fees are fixed, but dependent upon volume. If producers cannot drill with necessary margins, volumes may decline and gathering and processing revenues will be impacted. The majority (83%) of Rice Midstream's 2015 forecasted DCF is a result of these contracts with Rice Energy, which has hedged much of their production through 2016 and reports to maintain sufficient ROI down to $2.75. The remainder of the cash flows are derived from 3rd party gathering and processing agreements with firms such as Antero and EQT. Rice has drilled 76 wells and has an inventory of 600 opportunities across 137,000 acres in the Marcellus and Utica. Rice expects to increase production through 2015 with a flat rig count of 9, which will be the primary driver of organic DCF growth over the short term. RMP will follow the formula of dropping down assets at a 9x EBITDA multiple, and will reap the benefits through the majority (56.5%) LP ownership and 100% Incentive Distribution Rights. Target yield will be 3.75% (100bps higher than AM as of 12/12) with an expected coverage ratio of 1.15x. Presently, Rice does not have a significant set of EBITDA inventory to drop into RMP, but are developing new assets which could be available by 2017. The Initial Assets The IPO will raise $500MM for a 43% public stake in the LP, with $438MM going to Rice Energy for the assets below. 83% of the gathering volumes are from Rice wells across 63,000 dedicated acres contracted for a 15 year period. The remaining 17% are volumes from 3rd parties covering 21,000 acres contracted for an average of 6 years 2.8MMDth/d high-pressure dry gas gathering system in Washington County PA 420MDth/d high pressure dry gas gathering system in Greene County PA The company expects to generate $49.6MM of Distributable Cash Flow over the course of 2015, the majority of which is derived from the gathering volumes associated with the Rice production. ROFO Drops RMP will have Right Of First Offer on several assets, mentioned below, owned and under development by Rice Energy. The water assets are likely awaiting a Private Letter Ruling, as is the case with Antero’s water assets, before becoming a legitimate asset for drop down to Rice Midstream. Ohio/Utica Gathering System – 49.7 miles of high pressure gathering pipeline expected to be completed in 2015. Rice has two non-binding LOI’s with Gulfport Energy and Mark West Energy Partners to dedicate acreage to the gathering system. Fresh Water Distribution Systems - Washington County, Greene County and Ohio each have a water distribution system which is fed by the two nearby rivers. All three are under expansion and require minimal capital expenditures as the water pipes are co-located next to the gathering pipelines. Due to the PLR issue mentioned earlier, the Ohio Gathering System is the key asset for future drop down growth for which EBITDA is not certain. Summary Although Rice Midstream Partners is following the recent natgas offerings from Dominion, CONE and Antero, the lack of transparent drop down assets will require significant gathering volume growth in order to achieve management’s best in class long term distribution guidance. While Rice operates with high margins, there is greater risk associated past 2016 if natural gas prices collapse and hedging becomes ineffective. With 17% of DCF contributed by 3rd parties, RPM has exposure to less profitable producers who may reduce production more significantly than Rice. The target yield assumes a 20% DCF CAGR, which will need natural gas to remain above $3.00 post 2016, less of a certainty with the structural changes playing out in the crude markets. Comments or Questions for MLPData? Please respond here
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Oct 31, 2014
What you need to know about Antero Midstream Partners IPO
As commodity markets continue to look for a floor, the Master Limited Partnership IPO window is open to issuers with high quality assets, low commodity exposure, and a large inventory of seasoned drop down assets. Over the past three weeks, CONE Midstream, Dominion Midstream, and Shell Midstream have all come to market with strong institutional…
As commodity markets continue to look for a floor, the Master Limited Partnership IPO window is open to issuers with high quality assets, low commodity exposure, and a large inventory of seasoned drop down assets. Over the past three weeks, CONE Midstream, Dominion Midstream, and Shell Midstream have all come to market with strong institutional demand and double digit gains. While the market has weakened due to the uncertain impact of falling crude and gas prices, these MLP’s have maintained their issuance premium. Antero Resources, a natural gas E&P company with assets in Marcellus and Utica, is launching Antero Midstream Partners on November 4th, which will own direct and indirect midstream assets primarily dedicated to servicing Antero’s gathering and processing needs across their acreage. Antero, which only became a public company in October 2013, will rely on the MLP proceeds to fund additional capital projects. Antero is the low cost producer in the Marcellus and Utica and has hedged production to realize natural gas prices above NYMEX strip prices for Q4 2014 through 2016, which has a premium value of $800MM. Antero has invested $1.2B in their midstream infrastructure which generated $66MM of EBITDA in the first half of 2014, as detailed below: Antero Midstream Partners will issue 37,500,000 units out of a total of 151MM, with a target midpoint yield of 3.4% ($0.68 annualized), 1.15x distribution coverage, raising $709MM of capital. The peer group’s attributes are illustrated below The Assets The initial assets will consist of a 20 year agreement to provide gathering and processing services to Antero’s current and future acreage in West Virginia, Ohio and Pennsylvania. Revenue is generated by charging Antero a low pressure gathering fee of $0.30 per Mcf and a high pressure gathering fee of $0.18 per Mcf. The company forecasts $48MM in EBITDA over the next 12 months, requiring $129MM in capital expenditures. Growth Opportunities Apart from the organic increase of gathering and processing volumes from the dedicated acreage, Antero has identified two additional assets sets for a drop down into the MLP: Fresh Water Distribution – Services which provide fresh water from the Ohio river to Antero’s Utica and Marcellus acreage. These assets were originally part of the initial MLP launch, but Antero has not yet received an IRS Private Letter Ruling which would allow inclusion. Presently, the IRS has put on hold any future PLR opinions. Once the PLR issue is resolved, it will be a matter of months before the entity is dropped into the MLP, for what is expected to be a combination of cash and units totaling $600MM. These water assets generate a similar EBITDA level as the current midstream assets and deliver 30-40% IRR, the highest returns across Antero’s midstream assets, albeit with Antero as the exclusive customer. ET Rover and Regional Pipelines Options – Antero has the option to purchase up to 20% of a non-operating interest in the ET Rover pipeline, a valuable option received by signing on as an anchor shipper on this new pipeline, which is expected to enter service in 2017. The illustration below suggests additional projects which may be developed by Antero and potentially dropped down to Antero Midstream Partners. As with all of the others in the peer group, Antero Resources, will own the GP and the Incentive Distribution Rights, which will incent further drop downs to Antero Midstream. Although some investors eschew such rights, they are necessary to enable these LP formations. During long holding periods (8-10 years), such IDR rights can significantly increase the LP’s cost of capital, the driver to Kinder Morgan's recent decision to merge their LP into a C-corp structure. By way of example, below is the current cost of capital for Phillips 66 Partners, a peer which has had a full year of drop downs and distributions. In the early years of high distribution growth, the IDR burden on existing shares is just 15bps. However, as the distribution and unit issuance grows over time, the cost of capital will accelerate. Conclusion Antero Midstream Partners will offer investors another captive LP unit with guaranteed sponsor cash flows and no commodity price risk. Unlike the peer group, Antero has a smaller set of developed Midstream assets which are available to drop into the MLP. Management expects to be “best in class” for distribution growth (20%), while managing to a lower coverage ratio than the peer group. Due to the market reception of Shell Midstream Partners, we expect Antero to price on the higher end of the range and open trading at $30 with a target yield of 2.25%. We expect another sizeable offering within 8-10 months to finance the Water Distribution assets, which will also provide investors and entry point. Given the IDR structure and large asset inventory, Antero Midstream is best suited for total return investors with a 5-8 year holding period.
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Oct 23, 2014
What you need to know about Shell Midstream Partners IPO
Investors have been awaiting Shell’s launch of their midstream master limited partnership, which is expected to price on October 28th. Shell Midstream Partners (SHLX) has indicated pricing between $19-$21 with a target midpoint yield of 3.25% and 37,500,000 units offered to the public. SHLX will be majority controlled by Shell Pipeline Company…
Investors have been awaiting Shell’s launch of their midstream master limited partnership, which is expected to price on October 28th. Shell Midstream Partners (SHLX) has indicated pricing between $19-$21 with a target midpoint yield of 3.25% and 37,500,000 units offered to the public. SHLX will be majority controlled by Shell Pipeline Company LP, a subsidiary of Royal Dutch Shell. Why has the market been so interested in this offering? Shell has some of most desirable onshore and offshore pipelines across the United States and Gulf of Mexico, with many new projects to increase capacity. Shell operates 7 tank farms across the U.S and transports more than 1.5 billion barrels of crude oil and refined products annually through 3800 pipeline miles across the Gulf of Mexico and 5 states. Shell also has interests in various non-operated assets which add an additional 8000 pipeline miles to their midstream network. As a result, Shell Midstream will have access to the largest set of EBITDA inventory ($1.5B) in the industry, providing long term investors with an opportunity to receive high growth income and unit appreciation, with minimal event risk, such as a GP or LP sale which could trigger an undesirable tax event. Shell Midstream Partner’s peer group will include Valero Partners (VLP), MPLX LP (MPLX) and Phillips 66 Partners (PSXP), which all share high coverage ratios, low yields, and double digit distribution growth expectations. Current Assets Shell Midstream will have minority ownership interests across four midstream assets Zydeco/Ho-Ho Pipeline: 43% interest in Houston to Houma 350 mile crude pipeline situated in the largest refining market in the US. 87% contracted with an average remaining term of 8 years Mars Pipeline – 28.6% interest in Gulf of Mexico offshore pipeline which exclusively handles 55% of shipper volumes. Pipeline originates 130 miles offshore and terminates at salt dome caverns in Clovelly, Louisiana Bengal – 49% interest in refined products pipeline connecting four refineries in LA to long haul transportation pipelines. 67% of capacity contracted for average remaining term of 2.5 years Colonial - 1.612% interest in refined products pipeline, which transports over 40 different refined products and over 100MM gallons per day to the East Coast across 5500 miles of pipeline. This pipeline provides the east coast with 50% of the refined products consumed in the region. Shipper terms are confidential. The above assets will generate the minimum quarterly distribution of .65/unit per the following allocations The expansion of the Ho-Ho and Mars pipeline will provide organic EBITDA growth in 2015 and 2016 as demand for pipeline capacity expands in both the offshore Gulf market as well as planned storage in Houston seeking demand outlets. Drop Down Assets Apart from increasing the ownership interests in the existing asset set, Shell Pipeline Company (SPLC) has additional assets which generate approximately $1B of EBITDA, while another $500MM of midstream assets could be dropped down into Shell Midstream, for an aggregate value of $15B, assuming a 10x EBITDA multiple. Shell’s drop down inventory is larger than that of it’s peer group, which all launched their MLPs in 2013. The list of potential drop down assets are listed below While it is speculative to assume when drop downs will occur to generate distribution growth, Sponsors have been shortening the window for drop downs into newly launched MLP vehicles. As an example, here are PSXP’s transactions since their listing date of July 23, 2013 07/23/14 $300MM Public IPO 02/14/14 $700MM drop down 10/22/14 $330MM drop down The estimated distribution growth rate for PSXP is 20%, which has been supported by the dropdowns to date. Market conditions will dictate the pace and timing of the dropdowns, but Shell Midstream is expected to manage to a similar +20% CAGR distribution growth rate. Conclusion Shell Midstream will be most attractive to total return investors given their expected 2% yield and +20% growth rate. We expect units to open trading around $30/unit and trade higher on strong institutional and retail demand. Such demand may lead to a rotation (and buy opportunity) out of peer group alternatives such as VLP, PSXP and MPLX, which have similar growth and EBITDA inventory profiles. Although Shell Midstream will be a core holding to a diversified MLP portfolio, investors should be careful to avoid paying a premium to wait for growth in 2016 and beyond.
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Oct 11, 2014
IPO Preview: Dominion Midstream Partners
Master Limited Partnership investors seek stable, fee based assets with high and transparent distribution growth opportunities. Dominion Energy has waited 10 years to launch an MLP which fits this description, and we expect the market will respond accordingly. Dominion Midstream Partners will offer patient investors double digit Distributable…
Master Limited Partnership investors seek stable, fee based assets with high and transparent distribution growth opportunities. Dominion Energy has waited 10 years to launch an MLP which fits this description, and we expect the market will respond accordingly. Dominion Midstream Partners will offer patient investors double digit Distributable Cash Flow (DCF) growth over the next 10 years, driven by existing pipeline and storage assets, as well as drop downs from new midstream assets being developed for the Utica region. Dominion Resources, a $40B market cap operator of Mid Atlantic Gas and Electric assets, will be pricing Dominion Midstream Partners (ticker DM) on 10/14, which will allow Dominion to realize a higher valuation for their midstream assets. The initial assets will include the Cove Point import facility, a $200MM EBITDA liquefaction and LNG terminal for imported gas. So why would you want to invest in a facility which is importing natural gas? After a three year permitting process, Dominion received final approval on 9/29 to begin construction this week on the Cove Point export facility, a $3.8B project with fully committed revenue from Sumitomo/Tokyo Gas and GAIL India. Customer's will be responsible for sourcing the gas into the Cove Point Facility, and DM will assume no commodity risk. This MLP structure is unique in that the LP will own Preferred Equity Interests (PEI) for the first $50MM in asset DCF from Cove Point (which presently generates $200MM in EBITDA), limiting any distribution growth from the initial asset set. The annualized Minimum Quarterly Distribution is set to $0.70, or a 3.5% yield at the $20 midpoint, with a coverage ratio of 1.05. The low coverage ratio is protected by the guaranteed cash flows from the 10 year tenants of the service, and the company has extended the subordination period to further protect the cash flows from the expected reduction in cash flows from the import facility, which is expected to be offset by increase from the Export project DCF, assuming the project is delivered on time. Further, the company will reserve 4.5 quarters of future distributions to add additional certainty for cash flows through 2018. The Growth Opportunity Dominion has a very large inventory of existing assets traversing the mid Atlantic region which could be dropped down to DM. However, the most attractive asset sets are being developed in the Utica to service the expanding volumes of gas which have very limited takeaway options. The chart below illustrates the growing Utica production and takeaway capacity opportunities where Dominion has focused their investment Source: Wood Mackenzie Dominion is developing several drop down opportunities, which will be offered to DM on Right of First Offer basis (ROFO). In addition to Cove Point, Dominion has formed JV partnerships for Blue Racer Midstream and the Atlantic Coast Pipeline to both share in the costs and develop cash flow certainty for the assets. The Atlantic Coast Pipeline, focused on supplying gas to coal power plants which are being forced to convert to gas, is expected to cost between $4.5 and $5.0B and should be operational by 2018, with the JV partners committed to using 90% of the capacity for 20 years. The Investment Opportunity Management expects DM to deliver high DCF growth in line with their peer group, similar to that of CONE Midstream Partners, which is trading at a 3.15% yield and an implied 14% growth rate as of 10/10/14. We expect DM distribution growth to begin in late 2015 or early 2016, at which point investors should expected 18%+ DCF growth. The sponsor will be funding all of the necessary capital expenditures, and the LP will issue debt and equity to fund the drop down acquisitions when they occur. This past week, the market re-evaluated MLP DCF growth for all units in light of the rapid fall in crude. In spite of the negative sentiment, we expect Dominion to price above range with strong institutional demand. Regardless of future volatility in the commodity markets, Dominion Midstream should offer investors +20% total return opportunities with minimal commodity risk and sponsor backed guaranteed cash flows.
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Oct 09, 2014
Oil Sinks MLPs
The free fall of crude has investors bailing on Master Limited Partnerships, while rates continues to trend lower. Investors are selling units on the frequent headlines that lower oil prices will sharply curtail shale production, which in turn will decrease midstream capex and distribution growth. Regardless of whether such growth is really…
The free fall of crude has investors bailing on Master Limited Partnerships, while rates continues to trend lower. Investors are selling units on the frequent headlines that lower oil prices will sharply curtail shale production, which in turn will decrease midstream capex and distribution growth. Regardless of whether such growth is really at risk, units have been heading south as buyers wait for a bottom before feeding on the opportunities served up by fearful investors. Below are the units which have experienced the greatest increase in yield over the past 30 days; a collection of high yield names where the market is expecting future distribution cuts due to weakening prices and demand. General Partner units, which are levered bets on the LP's performance, are trading 5 to 15% lower since September 30th Hard to say where the short term floor is for oil, but regardless of where it settles, the crude correlation is increasing, offering savvy investors attractive yield and growth entry points.
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Oct 08, 2014
Crude By Rail and Falling Prices
With falling world oil prices and expanding North American supply, some producers may be nearing the point of breakeven variable margins, The price point at which shale oil production decreases is widely speculated due to the variety of economics related to the shale plays and specifc producer overhead. WTI $75-$80/bbl seems to be a sentiment…
With falling world oil prices and expanding North American supply, some producers may be nearing the point of breakeven variable margins, The price point at which shale oil production decreases is widely speculated due to the variety of economics related to the shale plays and specifc producer overhead. WTI $75-$80/bbl seems to be a sentiment floor which will induce revaluation and likely further selling of Energy related companies. The below chart illustrates the impact of falling crude on Upstream MLPs: In spite of weakness prices, Crude by Rail, an expensive distribution alternative for Alberta and Bakken oil, continues to forecast significant growth. The historical data, during which crude has averaged +$90bblm, clearly indicates the demand for rail as a transportation alternative to reach East, West and Gulf coast refineries. A lack of pipelines, or available capacity, enables rail to be an exclusive transportation channel for many producers. Just last week, Canadian Pacific revealed during their Investor Day event that they expect 2018 crude by rail revenues to increase by $750MM from their key Western Canada locations of Edmonton, Hardisty, Kerrobert and Bruderheim. Source: Association of American Railroads However, further rail demand is driven by producer economics. The below map illustrates the transportation differentials from the location of Hardisty, Alberta to US refinery locations along the Gulf and East coast. With near month West Texas Intermediate (WTI) to Western Canada Select (WCS) differentials trading at $-12.80, Hardistry producers are realizing just $60bbl for each barrell of crude delivered by rail. In July, the Canada Energy Research institute pegged Steam Assisted Gravity Drainage (SAGD), the process used to extract bitumen, at $50.89 CAD or $45.43 USD. source: USD Partners The current downward trend of oil prices cannot be regressed against historical rail demand given the paucity of operating history. So we will leave it up to the markets to speculate about what will happen to crude by rail, and MLP risk premiums, as the global oil story plays out.. As we approach Q3 earnings, management teams will be updating their play book to persuade the market that they can maintain their projected organic growth rates. High growth MLP investors may want to consider the use of deep out the of the money WTI Oil puts to hedge against the potential of panic selling onset from a continued fall in crude.
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Oct 03, 2014
Oil By Rail Assets Will Drive This MLP IPO Higher
North America is awash in new oil production as a result of technological innovations related to hydraulic fracking. The continent is lacking the necessary midstream pipeline infrastructure to move supply to areas of demand, such as refinery's and export facilities. Crude by Rail, the process of loading oil into rail cars and transporting to a v…
North America is awash in new oil production as a result of technological innovations related to hydraulic fracking. The continent is lacking the necessary midstream pipeline infrastructure to move supply to areas of demand, such as refinery's and export facilities. Crude by Rail, the process of loading oil into rail cars and transporting to a virtual set of demand locations, has been expanding 27% year over year as illustrated below. Future growth is expected as pipelines continued to get delayed by local opposition, and production continues to expand. Ironically, such pipelines are meant to be a safer alternative to that of rail or truck, but such perspective is lost when the debate is local and NIMBY. Crude by Rail also has opposition due to the tragedy in Quebec, but the industry is focused on improving their safety procedures with an outright ban unlikely due to current railroad regulations. The Opportunity USD Partners (Pending USDP), a new Master Limited Partnership expected to price 8,850,000 public units on October 6th with a target yield of 5.75%, has developed a unique set of rail terminal assets in the Hardisty region of Alberta, which is Canada's equivalent to Cushing, OK. Oil Sands are produced in western Alberta and production is aggregated in Hardisty, a key logistics transit point to the US east coast and gulf refiners. Over 6MMbbls of local crude storage will be available by 2015 with current takeaway pipelines operating at full capacity. Regional production is expected to increase annually by 10%. USD has developed a pipeline linking the storage facilities to their rail terminal and inked an agreement with Gibson, the storage owner, for exclusive rail terminal access to their storage. Keystone XL, if developed (Hardisty to Steele City leg), would add pipeline capacity to the south, and likely reduce the demand for rail to the gulf, but would not impact east coast distribution. Enbridge is also spending $1.8B to expand their Hardisty to Edmonton mainline system, to 570,000bpd, by early 2015, which should not impact rail demand to the south and east, but redirect supply for export. USD has an extensive background in developing rail terminals with an impeccable safety record. They are leveraging their experience to form this new MLP and have partnered with Energy Capital Partners, a $13B PE fund and Goldman Sachs. The MLP with have three assets: Hardisty Rail Terminal - commenced operations in June 2014 to provide terminalling loading services on a fixed take or pay contract basis. The facility can load up to two 120 unit train per day. 100% of the revenue is fully contracted, 83% of which to investment grade entities. This asset is expected to generate 85% of the Adjusted EBITDA. Ethanol Terminals - located in Texas and California, two destination capable unit train ethanol terminals with a combined capacity of 33,000bpd. The San Antonio facility has one exclusive customer with a contractual expiration in 2015 that provides successive three year rollover options. The Colton facility also has one exclusive customer since 2009 for which the contract can be terminated at any time. Ethanol is at a two year low due to higher corn production and lower gasoline demand. Due to the ethanol discount ($1.00) to gasoline, blenders are using the maximum rate of ethanol which should increase demand. These assets are expected to generate 6% of adjusted EBITDA. Rail Car Fleet - 3799 leased rail cars which are contracted out on a long term basis. 65% of the rail cars are dedicated to USD terminals and the remaining are dedicated to facilities previously owned by a USD subsidiary. 65% of these cars were constructed in 2013 and 2014, have a 50 year expected life and are equipped with the most recent safety enhancements. These assets are expected to generate 9% of adjusted EBITDA. Distribution Growth The opportunity for growth is primarily related to the Hardisty location, as the company has plans for two additional phases, which if completed, would increase EBITDA by 270% If Hardisty II is completed using 30% equity and the prevailing 1.1x coverage, we forecast Q1 2016 DCF to be $13MM, or a $.5255 quarterly distribution, which would be 82% higher than the minimum quarterly distribution of $.2875. Given the company's track record in developing the rail terminals and the exclusive rail distribution agreement with Gibson, we see this as a great opportunity to realize a 5.75% yield with double digit distribution growth in early 2016. Total return investors can expect a significant return upon the formal announcement of Hardisty II, which will confirm a 20%+ DCF growth rate, and compress yields to be in line with the peer group illustrated below
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Oct 01, 2014
MLP M&A leaves LP's searching
After two recent M&A transactions involving Limited Partnerships, investors may be feeling nervous about future deals. Enterprise Products announced the purchase of Oiltanking Partners GP and their 66% LP interest and related subordinated units, for which they paid $83/unit for the 68,137,202 units , or a $1B control premium for the GP. In…
After two recent M&A transactions involving Limited Partnerships, investors may be feeling nervous about future deals. Enterprise Products announced the purchase of Oiltanking Partners GP and their 66% LP interest and related subordinated units, for which they paid $83/unit for the 68,137,202 units , or a $1B control premium for the GP. Incentive Distribution Rights were also acquired as part of the GP, which adds only $3MM of DCF back to unitholders once the IDRs are terminated. However, the public LP unitholders of Oiltanking Partners (OILT), are set to receive a paltry 1.23 shares of EPD for each OILT unit, or roughly $48 per share as of today. The German owners of the GP, and the US management team, are set realize a $3B gain on their assets only three years since their IPO, and are likely the only unitholders happy about this deal. After the Kinder Morgan transaction, where at least LP unit holders were paid a 30% market premium, MLP investors are now being saddled with tax and reinvestment penalties as a result of these transactions, and may soon cringe when new deals are announced. Oiltanking LP units have owned a set of highly desirable assets in the Houston Ship Channel, for which EPD has accounted for 31% of their revenues and 40% of EBITDA. These assets are very strategic to EPD and their condensate export partnership. OILT unit holders have been receiving $1.04/unit, with a +20% distribution growth rate, which is why units trade on a 2% yield. Upon the conversion to EPD units, unit holders will now receive $1.44 for 1.23 EPD units, or a $1.77 equivalent, a 70% increase. Sounds attractive, until you consider the 6% EPD growth rate and that OILT was forecasted to pay a similar distribution by 2016, with double digit growth thereafter. EPD has paid a very high price for this acquisition, 35x TTM Adjusted EBITDA, and time will reveal how accretive this may be to their growth. OILT unitholders, which desire high DCF growth to maximize total return, are now in search of a replacement MLP investment vehicle. A similar conclusion for many Kinder Morgan Energy Partners unitholders.
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Sep 25, 2014
JP Energy Partners IPO Preview
JP Energy Partners (JPEP) is expected to price the week of 9/29 with an expected range of $19-$21 and target distribution yield of 6.5%. The sponsor is a private equity fund ArcLight, which has funded the acquisition of over 20 assets to form the asset base for current and future drop downs. This is a relatively small set of assets which will be ex…
JP Energy Partners (JPEP) is expected to price the week of 9/29 with an expected range of $19-$21 and target distribution yield of 6.5%. The sponsor is a private equity fund ArcLight, which has funded the acquisition of over 20 assets to form the asset base for current and future drop downs. This is a relatively small set of assets which will be expanded by further Sponsor acquisitions and drop downs. Expected growth capital expenditures are $110MM. The company operates in three segments Crude oil Transport - Representing 55% of current EBITDA, these assets consist of 135 trucks, Cushing Leased storage and the Silver Dollar Pipeline. The system currently consists of approximately 50 miles of high-pressure steel pipeline with throughput capacity of approximately 100,000 barrels per day and an interconnection to a third-party long-haul transportation pipeline. The Silver Dollar Pipeline System's operations are underpinned by long-term, fee-based contracts with leading producers in the Southern Wolfcamp. Management indicates that these assets will be the source for future distribution growth. Refined Products - Representing 15% of current EBITDA, two terminals in Texas and Arkansas which include product storage, injection of additives, loading of refined products at truck racks, ethanol and bio-diesel blending, railcar offloading, and transfers to connecting pipelines. Management believes they have the capacity to add up to 18 additional terminals without increasing overhead. NGL's - Representing 30% of current EBITDA, the assets consist of propane distribution business and retail cylinder exchange business. Management expects to increase growth by providing propane services to the industrial sector offsetting the seasonality issues related to the retail business Distributable Cash Flow and Growth The company expects to generate 2015 DCF which will cover minimum distributions at 1.4x, providing capital for future acquisitions. Drop down asset inventory could increase EBITDA by 50%. Management has provided no guidance related to distribution growth. It also is noteworthy that in the final prospectus, they disclosed a "material weakness" in their internal controls over financial reporting, which suggests a higher risk related to forecasting and restatement charges. Conclusion JPEP will be a small cap IPO with wide trading spreads and minimal transparency to growth over the short term, which is why investors will be setting a higher yield on the units. With nearly a 25% interest in the GP which owns the IDR's, management is strongly incented to grow DCF. Given the abundance of equity issuance, we expect weakness in the offering as allocations to hedge funds will be flipped. For those looking for portfolio income, we would look to purchase units at $18 and keep a watchful eye on the propane business for potential weakness which could impact future growth.
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Sep 23, 2014
CONE Midstream Partners Preview
The initial public offering of CONE Midstream Partners LP (CNNX) is expected to price on September 24th, offering investors another choice for a growth-oriented midstream MLP. CNNX is the result of a 50/50 sponsorship by CONSOL Energy Inc. and Noble Energy, Inc.. The two sponsors have a joint active natural gas and NGLs drilling program in the Ma…
The initial public offering of CONE Midstream Partners LP (CNNX) is expected to price on September 24th, offering investors another choice for a growth-oriented midstream MLP. CNNX is the result of a 50/50 sponsorship by CONSOL Energy Inc. and Noble Energy, Inc.. The two sponsors have a joint active natural gas and NGLs drilling program in the Marcellus Shale play and are forming the MLP to drop down, and develop, assets to service their Marcellus production. CNNX will operate on a fee-based revenue model, with initial assets that include natural gas gathering pipelines, compression, and dehydration facilities along with condensate gathering, collection, stabilization and stabilization facilities. All of the partnerships' revenues will initially come from the sponsors' on long-term, fee-based gathering contracts. The gathering agreement initially covers 496,000 acres in the Marcellus Shale. The IPO proceeds will go to the sponsor companies and CNNX will have a $250 million revolving line of credit to provide liquidity. The management team comes from senior leadership at CONSOL and Noble. IPO, Distributions, and IDR Details With the IPO, 17,500,000 common units, representing 29.4% interest, will be sold to the public. Through the CONE Gathering LLC joint venture subsidiary, the sponsors will retain 11,663,121 common units, 29,163,121 subordinated units, for 68.6% of the LP interest, and a 2% general partner interest. Underwriters have the option to purchase an additional 2,6250,000 common units. At the midpoint of the $19 to $21 per unit expected pricing range, CNNX will have a market cap of $1.2 billion and a target yield of 4.25%. The minimum distribution rate will be $0.2125 per unit quarterly, for an annual rate of $0.85. The first 15% IDR tier will be reached at a quarterly distribution of $0.24438, and the top 50% IDRs kick in when the distribution exceeds $0.31875, or $1.275 annually. The general partner retains the right to reset the IDRs if at some point in the future the IDR payments reduce the company's ability to competitively add on assets. Three-Tier Asset Set The midstream assets held by CONE Gathering have been divided into three categories. Here are the descriptions from the prospectus: Anchor Systems include our midstream systems that generate the substantial majority of our current cash flows and that we expect to drive our growth over the near term as we increase average throughput on these systems from our Sponsors' growing production. Growth Systems include our high-growth, developing gathering systems that will require substantial expansion capital expenditures over the next several years, the substantial majority of which will be funded by our sponsors in proportion to their retained ownership interest. Additional Systems include several gathering systems primarily located in the wet gas regions of our dedicated acreage that we expect will generate stable cash flows and require lower levels of expansion capital investment over the next several years. With the IPO, 75% of the Anchor systems and 5% each of the Growth and Additional systems controlling interest will be transferred to CONE Midstream Partners. First-Year EBITDA and DCF Expectations The three tiers of midstream assets are forecast to produce EBITDA of $113.9 million for the 12 months that will end on September 30, 2015. The CNNX share will be $67.4 million, resulting in DCF of $58.2 million. To cover the minimum distributions, the company needs EBITDA of at least $59.8 million and DCF of $50.6 million. The total EBITDA for CONE Gathering in excess of the CNNX share represents an initial amount that could be dropped to the MLP. Growth Capex Spending Plans CONSOL and Noble have aggressive drilling plans for their acreage holdings in the Marcellus. From 111 wells drilled in 2013, the two expect to complete 177 in 2014. There are over 5,700 drilling locations in the acreage dedicated to CNNX. All of the new wells are expected to be connected to the CONE midstream system. For the 12 months ending in September 2015, the companies forecast $621.1 million of midstream expansion capex spending. Of that total, CNNX will be responsible for $114.8 million and the sponsors will pay the remaining $506.3 million. The growth capex spending will increase the fee revenues of the Growth and Additional systems, which can then be dropped down in steps to CONE Midstream Partners, propelling steady distribution growth. Conclusion CONE Energy Partners offers income and total return investors stable cash flow access to the largest Marcellus acreage without commodity exposure. The sponsors' Natural Gas E&P 15% ROI target is realized when NG is equal to and above the $2-$3 range, well below the natural gas spot and forward curves. The sponsors expect to fund 95% of the future growth capital, which will allow the LP to benefit from the increase in gas volume without DCF dilution from unit issuance. Once the new sponsor assets are providing stable cash flows, the LP will purchase the assets and will need to access the capital markets, which management expects will not be for a few years. With a midrange yield of 4.5% and implied 14% growth, CNNX is an attractive addition to your portfolio up to $26 prior to their first distribution.
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Sep 23, 2014
Regulatory Landscape for MLPs
Master Limited Partnerships are increasingly in focus as organic distribution growth coupled with yield compression has provided investors with double-digit, tax-deferred, total returns over the past 24 months. However, there is often the conditional warning of dark clouds on the horizon for MLPs, and one such risk is a potential change in tax poli…
Master Limited Partnerships are increasingly in focus as organic distribution growth coupled with yield compression has provided investors with double-digit, tax-deferred, total returns over the past 24 months. However, there is often the conditional warning of dark clouds on the horizon for MLPs, and one such risk is a potential change in tax policy, which may impact the ability for partnerships to distribute cash to investors. This article updates investors with the latest public comments from the Senate Finance Committee and Internal Revenue Service to assess the level of risk associated with such a change. First, a brief primer on Master Limited Partnerships, which are energy oriented "pass-through" entities where no tax is paid at the partnership level and partnership income passes through and is taxed only at one level, the individual partner or unitholder. Since deductions such as depreciation and depletion are also passed through to individual partners, the percentage of taxable income is often quite low, and the majority of the distributions are considered Return of Capital. As such, Master Limited Partnerships are not subject to corporate taxation, and unitholders receive a significant portion of their distributions, in most cases, on a tax-deferred basis. In order for a set of assets to be considered a Master Limited Partnership, 90% of the income must be derived from specified sources, the latter of which has been a definition expanded by the issuance of Private Letter Rulings, provided by the IRS at the request of those seeking for form an MLP. Without such approval, the MLP could be at risk of being considered a corporation. If you seek more detailed and nuanced definitions, please refer to NAPTP and Latham & Watkins as references. So why is MLP taxation an area of interest? In 2014, Master Limited Partnerships will distribute $29.8B in cash flows to unitholders, the majority in the form of Return of Capital. Since 10% of MLP assets are owned within ETFs, Closed End Funds, and Mutual Funds, which are structured as C-corps, the actual tax deferred cash returning to investors is 90% of the total, or roughly $26B. General Partners, which are structured as either C-corps or MLPs, are set to receive roughly $6B in cash flows from the LPs to the GPs, mostly in the form of Incentive Distribution Rights. PwC reports there are approximately 10MM K-1s distributed on behalf of Master Limited Partnerships, which equates, on average, to $2600 of annual distributions to each K-1 recipient. Since the majority of assets is non-qualified, these cash flows essentially lower basis, and the tax is recaptured at the time of sale, along with distributions when the capital account is depleted to zero. The investor tax bill is paid, just in the future, with the benefit of tax-deferred principal growth. On September 17th, the Senate Finance Committee held a hearing on energy tax policy, advertised as Reforming America's Outdated Energy Tax Code, which covered an expansive set of public policy issues. During the hearings, Master Limited Partnerships were briefly highlighted by Senator Stabenow (D-MI) as she postured that the carbon industry has been set up to succeed by way of tax policy, and that same consideration should be applied to renewables to create a level playing field. The Senator goes on to reference Master Limited Partnerships as a potential solution and voices support for the MLP Parity Act, which would enable renewables to receive equivalent tax status to that of fossil fuels. The Senator asks Bloomberg's Ethan Zindler to comment, in which he replies that the Parity Act makes a lot of sense, in part, due to the retail investor appetite for income vehicles, which could provide significant capital for growth and investment. The IRS has also been looking to revise their approach to Private Letter Rulings, by first pausing any future approvals to those seeking approvals for new MLPs. Recently, the Treasury Department and IRS released their 2014-2015 Priority Guidance Plan, which includes a new initiative, "Guidance under §7704(d)(1)(E) regarding qualifying income for publicly traded partnerships." Such an inclusion indicates that they are seeking to provide formal asset suitability guidance rather than the current policy of assessing each PLR request. Often the allure of the MLP structure, as presented by the financial media, is mitigated by the potential risks associated with a tax policy change, which would have an adverse short-term impact on price levels. Ironically, the current facts suggest that tax policy risk is not significant, but the risk of MLP conversion should be of greater concern. Kinder Morgan Inc (KMI), one of the largest C-corp GPs, recently announced the acquisition of Kinder Morgan Energy Partners LP (KMP), leaving many long-time individual unitholders with a significant, and unexpected, tax bill. While very few expect this transaction to be followed by others, it reminds us that often the most significant risks are those that are not obvious to investors, and the most discussed risks frequently are those that impact investment behavior.
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Aug 11, 2014
Thoughts about Kinder Morgan's MLP Exit
On the January 15th, 2014 earnings call, after months of unsuccessfully trying to convince the market that it was not properly valuing the future prospects of Kinder Morgan Energy Partners, Rich Kinder challenged investors on the call by stating "We proved the doubters wrong the first time around and I anticipate the same result this time. You sel…
On the January 15th, 2014 earnings call, after months of unsuccessfully trying to convince the market that it was not properly valuing the future prospects of Kinder Morgan Energy Partners, Rich Kinder challenged investors on the call by stating "We proved the doubters wrong the first time around and I anticipate the same result this time. You sell, I'll buy and we will see who comes out best in the long run." Hard to say if the transaction announced last night was Plan B if the market did not bid up shares and lower Kinder's cost of equity, but either way, Rich Kinder emphatically made his point by transforming Kinder Morgan Energy Partners into the largest energy infrastructure corporation in North American, and shedding the MLP tax shield loved by millions of income oriented investors. The chart below illustrates the challenge Kinder had persuading the market to increase the valuation, before dropping the hammer to make his point. So what does this mean to the Master Limited Partnership structure now that 10% of benchmark index has essentially stepped out of the MLP garden? For one, there are many investors who were receiving a 7% tax deferred yield who will be receiving 5% or so once the transaction is consummated, without any tax shield. In addition to the $30B of capital owned by such investors, closed end funds, ETF's, and mutual funds will also be hard pressed to find similar yield and liquidity in the market, forcing them likely to take more risk to achieve the same aggregate exposure. For those who want to speculate about other high, deep in the split LP's that might benefit from such a move, the below table of midstream LP's might be of interest. Although many are at the high splits, none have the IDR burden overhead which strangled Kinder's growth. Perhaps in a few years that may change for some, but for now, Kinder had very unique circumstances due to both their success and longevity operating with a very favorable GP agreement. Analysts have begun to speculate about what will transpire after this transaction, which is perhaps similar to predicting the weather. We have yet to find one expert who predicted the Kinder transaction, as most suggested a very complex path to rolling up the assets, in spite of the suffocating high cost of capital. Kinder provided very little indication, as they should, but even went so far to state the case against such a rollup at the 2014 NAPTP conference, suggesting cost of capital would be below 9% and expense synergies would be a paltry $4MM. What we do know is that an expanding base of investors have allocated capital to Master Limited Partners, and a very large and well respected operator will no longer provide them with healthy tax deferred income, that has been the foundation of many portfolio's.
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Jul 29, 2014
Tallgrass Energy Partners and the Pony Express Pipeline
Last week, high-growth MLP, Tallgrass Energy Partners LP announced a drop-down acquisition that will allow the partnership to maintain its sector leading distribution growth profile and possibly accelerate that growth into 2015. The shale revolution has created new pipeline infrastructure to cost effectively transport oil between producers a…
Last week, high-growth MLP, Tallgrass Energy Partners LP announced a drop-down acquisition that will allow the partnership to maintain its sector leading distribution growth profile and possibly accelerate that growth into 2015. The shale revolution has created new pipeline infrastructure to cost effectively transport oil between producers and consumers. New pipelines have considerable lead time as customer commitments have to be obtained, permits need to be acquired, and then development can begin. However, there are pipelines which have been in place to move natural gas flows which are now being converted to move oil, thus bypassing the build challenge of new pipeline capacity. The Pony Express is one such pipeline which includes the conversion of a 430 mile natural gas line and construction of an additional 260 mile extension to transport crude Bakken-originated light sweet crude from Guernsey, Wyoming to Cushing, Oklahoma. The main line is expected go into service in Q3 of 2014, with a 66 mile, Northeast Colorado lateral extension that will go into service in the first half of 2015. At present, the Pony Mainline pipeline has 5 year commitments for approximately 206,000 bbls/d of committed capacity under firm contracts that have a weighted average fee of $3.30 per barrel, and the Northeast Colorado Lateral currently has approximately 81,000 bbls/d of committed capacity under firm contracts that have a weighted average fee of $3.60 per barrel. Presently, only 30% of Bakken crude is delivered by pipeline. The majority is shipped by rail, which is much more expensive and will be subject to future regulations and higher expenses due to the changes to rail care safety requirements. On July 21, TEP's sponsor and general partner, Tallgrass Development LLC announced it had offered TEP the right to purchase a 33.3% interest in the Tallgrass Pony Express Pipeline for $600 million. The purchase will be funded with a 7 million share equity issuance and the balance from TEP's existing revolver. The equity issue is expected to net $280 million leaving $320 million of new debt. This deal assumes a 9x EBITDA multiple, or approximately $66MM on EBITDA once fully operational. Here is the breakdown from EBITDA to distributable cash flow: $66 million EBITDA minus: $6.3 million maintenance capex (using ratio from projected Q2 results) $12.8 new debt interest $11.4 million of incremental distributions and IDRs on new units. Equals $36.5 million of additional accretive DCF or $0.76 per unit based on 47.9 million units outstanding after the equity issuance. Using a 1.2 times coverage ratio, the Pony Express drop down provides $0.63 of add-on distribution per unit. Including incentive distribution rights to be paid to the general partner, this amount of cash flow allows Tallgrass Energy Partners to increase the annual distribution rate up to $1.91, or $0.4775 quarterly, compared to the current $0.38 rate. Tallgrass Energy Partners has the highest 3-year projected annual distribution growth rate - CAGR - of any MLP at 38.6%. The Pony Express acquisition puts a high level of visibility on a large portion of that number for next year at it appears that the market has undervalued the growth prospects for TEP. At the current distribution rate, TEP yields 3.8%, which is almost double the yields on other high-growth units. Even though TEP is up 78% over the last 12 months, the unit price gains are not keeping up with the distribution increases. An increase to $1.90 per unit annual distribution is a 25% rise from the current level. It will be up to Tallgrass management to judge how fast the payout can be raised on a quarterly basis. With this type of growth, at a peer comparable 2.5% yield, the unit price would have to climb to $76, compared to just under $40 currently. Tallgrass reports its Q2 results on August 6th after the market. Since the announcement of equity issuance on 7/21, TEP has fallen -10.5%, giving investors an attractive entry point before the market fully digests the impact of the Pony Express acquisition.
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Jul 07, 2014
Kinder Morgan Institutional Fund Flows
After peaking at over $41 per share in late May of 2013, it has been a rough 13 months for investors in Kinder Morgan, Inc. (KMI). Over the last 12 months KMI has produced a total return of -1.41% compared to 25.9% for the S&P 500 and 22.3% for the Alerian MLP index, calculated on a total return basis. During this same period, almost $14B of ne…
After peaking at over $41 per share in late May of 2013, it has been a rough 13 months for investors in Kinder Morgan, Inc. (KMI). Over the last 12 months KMI has produced a total return of -1.41% compared to 25.9% for the S&P 500 and 22.3% for the Alerian MLP index, calculated on a total return basis. During this same period, almost $14B of new institutional capital has flowed in the MLP sector by way of packaged products such as closed end and exchange traded funds. The basic, fundamental reason for the 25% share price drop was a forecast slow down in the distribution growth of Kinder Morgan Energy Partners LP (KMP) and a subsequent reduction in the growth of in the general partner payments made by KMP to KMI. Currently KMI is expected to grow its dividend by 8.4% over the next three years, compared to the mid to high teens growth rates on the year-over-year dividends being declared a year ago. While there are fundamental reasons why the share price of any stock moves up and down, the stock exchanges are supply and demand markets. If more investors, traders and institutional money managers want to buy, the share price will rise. An excess of sellers will push the share price down until the price is attractive enough to bring a balanced number of buyers. Although the concept is basic to share price values, it is important to remember that it takes an excess of buy orders to drive shares higher, which means that the perception must that the shares are worth more than the current value. Institutional Holders Dumped KMI Institutional money managers file SEC Forms 13F listing the size of investment holdings. The latest 13F data is for Q1 of 2014. The Q2 filings will not be available until the end of July. In the first quarter of 2013, institutional managers reduced their KMI holdings by 4.67%, from a year-end ownership of 534 million shares down to 509 million. For perspective, KMI has 1.04 billion shares outstanding. Longer term, a blended - from the 2013 Q2 and 2014 Q1 holdings - list of the largest KMI institutional investors shows their holdings dropped by 18.7% from the end of Q2 2013 through the end of Q1 2014. These holdings were 31% of the KMI shares outstanding at the end of June last year, down to 24.5% as of March 31 this year. The numbers of KMI shares in institutional hands during the period when the share price dropped by 24% illustrate the supply and demand forces in the market. Over a 9 month period, the stocks largest investors unloaded 6.5% of the total shares outstanding, and during the same period, the share price dropped by about 25%. Fewer KMP Units In Institutional Hands As an MLP, Kinder Morgan Partners is less widely held by institutions, with most of the holdings concentrated with funds focused on the MLP sector. Since KMP is the second largest MLPs, funds tracking the sector will to a certain extent own KMP units in significant numbers in spite of the market outlook. For example, an ETF tracking the Alerian MLP index will have 8.5% of its assets in KMP. In addition, KMP regularly issues equity units to raise growth capital, so funds may add to positions to retain a proportional holding. At the end of Q1 2014, total institutional holdings of 85.2 million units were 19% of the total outstanding. During Q1 the holdings increased by 2.2 million units or 2.15%. During the quarter the number of units outstanding increased by 1.8%. For the period from the end of Q2 2013 through then end of Q1 2014, the number of KMP units in the portfolios of the 20 largest positions declined by 12.8%. During that same period the number of units outstanding increased by 8.5%. As a result, during the 9 month period, the holdings of the top 20 institutions dropped from 14% to 11.3% of the total outstanding units. Institutions own a larger percentage (71%) of the smaller number total Kinder Morgan Management (KMR) units, which mirror KMP units. The 10% decline from Q2 2013 to the end of Q1 2014 in KMR units owned by the 20 largest investors from add another one percent drop in largest institutional holdings of KMP. An interest point is that the largest investors own either KMP or KMR, but not both. Only three names are on both top 20 lists. During the 9 month sell-off, the KMP unit value dropped by about 20% below the April 2013 high. Currently the trailing twelve month return including distributions is a positive 2.62%. The chart below shows the price movements during these institutional outflows: Institutions Back In During Q2, or Low Volume Bounce? Over the second quarter, the KMI share price has recovered from the March lows and is now up 20% from that point, but still 10% below the 2013 first half highs. The question going forward is whether the share price recovery is sustainable, or just a bounce off of too deep lows. Since the 13F reported holdings will not be available until the second half of July, one clue from currently available information comes from trading volume. According to NYSE historical data, KMI had trading volume of 6.98 million shares per day over the 2013 first quarter. In contrast, over the last 90 days, KMI has traded on average 5.63 million shares per day. Volume has climbed to 6.82 million for the last 10 days. The trading volume data leads to the hypothesis that the large institutional investors have not yet moved again in force into KMI. To move again back above $40, Kinder Morgan - from both KMI and KMP - may need to provide forward visibility of more attractive levels of dividend/distribution growth. We will be watching the Q2 earnings call on July 16th to see if the export activity translates into a sustainable change to distribution growth.
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Jun 26, 2014
When Might North American Oil Production Peak?
While there are many opinions on the future volumes of North American oil production, we recently took notice of estimates put forth by a company which has significant exposure to these estimates, Plains All American. "There are visible challenges on the horizon..." PAA stated at the their Analyst Day, which should be noteworthy to those looking to…
While there are many opinions on the future volumes of North American oil production, we recently took notice of estimates put forth by a company which has significant exposure to these estimates, Plains All American. "There are visible challenges on the horizon..." PAA stated at the their Analyst Day, which should be noteworthy to those looking to establish long term MLP positions with oil exposure. For its 2014 Analyst Day on June 5 the Plains All American Pipeline LP (PAA) management team opened the presentation with the company's overview and analysis of the North American crude oil market. Some interesting data in the crude projections point towards slower growth prospects for crude focused, midstream MLPs if the forecasts come close to being correct. The future of U.S. crude production is of major interest to PAA. Currently the company generates 75% of revenue from crude midstream operations. PAA has a history of steady dividend growth, primarily fueled by capital growth projects, despite volatile production conditions. Crude Production Growth to Flatten The PAA management team gathered information from a range of sources to put together a five-year North American crude forecast. From a production level of 11.5 million barrels per day in 2013, production is expected to increase each year to reach 15.4 MMbls/day in 2018. PAA has assumed that the current regulatory framework for fracking and exports will remain in place over the next several years and realized crude prices will support the current level of development in the future. Over $90B of annual capital is currently deployed to support onshore lower 48 production according to PAA. Management anticipates that rail, boat/barge will move 1.8MMBbls/day (or 46%) of the new production by 2018 due to a lack of pipeline infrastructure. For comparison, here are the Energy Information Agency historical and estimated U.S. crude production numbers from 2010 through 2015. Working through the next five years, each year a greater portion of well completions for new production is required to offset the decline rate of existing wells. For example, in 2013, 62% of production from new completions was offset by declining production from existing wells. However, as more wells are completed each year, the decline rate will grow and the forecasts show that larger and larger percentages of projected new production will be needed to offset the declines. According to the PAA presentation charts, by 2018 90% of new completion production will go to offset declines and only 10% of completions will count as added production growth. If these projections come to pass, the results could significantly impact midstream, crude focused MLPs which require volume expansion to drive distribution growth. By 2018, the bulk of new production will be required to just tread water and there will be very selective demand for growth of midstream gathering and crude transportation assets. Also, just a modest 10% to 15% decline in completions turns annual growth into level or even declining crude oil production. MLPs Focused on Crude Growth If the expected crude oil production growth starts to decline by 2018 the economics and commitments required for new midstream infrastructure will be greatly challenged. Currently, there is tremendous activity from the midstream MLPs to plan and build assets to support a growing flood of oil out of plays like the Williston and Permian basins, the Mid-Continent, Rockies and South Texas. Although the above information is just a projection, and even PAA management stated that the probability of events working out as projected is low, this is the best forecast PAA could put together using currently available date. For individual MLPs, the analysis focuses on growth plans based on crude oil gathering and transport. There are several paths to partnership and distribution growth including project construction, acquisitions, and drop downs from a sponsor. The fate of growth projects also depends on the specific plays to be exploited. The point for MLP investors is that if crude production growth flattens, the growth pie will shrink and it will be even more important to analyze how each MLP plans to generate cash flow growth. Performance amongst the peer group will differ significantly in a North American energy scenario where production growth has slowed. Factors That Could Affect MLP Growth Plans If in the years of 2018 and beyond, North American petroleum production levels off rather than maintaining a growth trajectory, the affected midstream MLPs may be forced to cut back on growth capital spending plans. Four years out is hard to plan for, so here are some factors that may help MLP investors determine if longer term distribution growth expectations need to be lowered or changed: An extended period of lower crude prices could result in lower well completion numbers, turning annual production growth into flat or declining production. A related factor would be higher natural gas prices, which could cause energy E&P companies to put more emphasis on drilling for gas instead of crude. Approval to export U.S. crude could change the equation. The PAA numbers point to a glut of light sweet crude in the near future and the ability to export excess production would support both the price of crude and E&P capital spending to increase production. The recent ruling which allows condensate exports may lower this potential USGC glut. Technology. The shift in the U.S. from a crude importer to potential exporter has been driven by technology that allows new finds to be found and advanced drilling methods to work those finds. Technological improvements to slow the decline of existing wells would completely change the crude production equation. Crude production growth and decline rates will vary significantly from region to region. To be able to grow, midstream MLPs that focus on the higher growth plays have the bet potential to meet their growth goals. Also, changes in crude transport methods, such as rail to pipeline may separate out which companies grow and those that don't if total crude production growth does slow. The point here is that despite the optimistic headlines, investors needs to be mindful of the macro picture. The next two to three years look very positive, but things could start to shift in the later years. After 2016, investors in crude midstream focused MLPs may need to reevaluate the strength of future crude growth in order to sustain expected distribution growth rates and be highly selective with their MLP selection.
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Jun 19, 2014
Will 2018 Peak Oil Production impact MLP's?
For its 2014 Analyst Day on June 5 the Plains All American Pipeline LP (PAA) management team opened the presentation with the company's overview and analysis of the North American crude oil market. Some interesting data in the crude projections point towards slower growth prospects for crude focused, midstream MLPs if the forecasts come close to…
For its 2014 Analyst Day on June 5 the Plains All American Pipeline LP (PAA) management team opened the presentation with the company's overview and analysis of the North American crude oil market. Some interesting data in the crude projections point towards slower growth prospects for crude focused, midstream MLPs if the forecasts come close to being correct. The future of U.S. crude production is of major interest to PAA. Currently the company generates 75% of revenue from crude midstream operations. Also, as a steady distribution growth focused MLP, PAA has a history of steady dividend growth, primarily fueled by capital growth projects. Crude Production Growth to Flatten The PAA management team gathered information from a range of sources to put together a five-year North American crude forecast. From a production level of 11.5 million barrels per day in 2013, production is expected to increase each year to reach 15.4 MMbls/day in 2018. For comparison, here are the Energy Information Agency historical and estimated U.S. crude production numbers from 2010 through 2015. Working through the next five years, each year a greater portion of well completions for new production is required to offset the decline rate of existing wells. For example, in 2013, 62% of production from new completions was offset by declining production from existing wells. However, as more wells are completed each year, the decline rate will grow and the forecasts show that larger and larger percentages of projected new production will be needed to offset the declines. According to the PAA presentation charts, by 2018 90% of new completion production will go to offset declines and only 10% of completions will count as added production growth. If these projections come to pass, the results could significantly impact midstream, crude focused MLPs (I think the issues is that with flat production growth, location and assets will be the major criteria for growth). By 2018, the bulk of new production will be required to just tread water and there will not be much demand for growth of midstream gathering and crude transportation assets. Also, just a modest 10% to 15% decline in completions turns annual growth into level or even declining crude oil production. MLPs Focused on Crude Growth If the expected crude oil production growth starts to slow four to five years in the future, the need for new midstream asset growth will also decline. Currently, there is tremendous activity from the midstream MLPs to plan and build assets to support a growing flood of oil out of plays like the Williston and Permian basins, the Mid-Continent, Rockies and South Texas. Although the above information is just a projection, and even PAA management stated that the probability of events working out as projected is low, this is the best forecast PAA could put together using currently available date. To see what MLPs could be affected, here is a list of companies that have growth plans revolving around growing crude oil production: Blueknight Energy Partners LP (BKEP) Enbridge Energy Partners LP (EEP) Plains All American Pipeline LP QEP Midstream Partners LP (QEPM) Rose Rock Midstream LP (RRMS) Western Gas Partners LP (WES) Factors That Could Affect MLP Growth Plans If in the years of 2018 and beyond, North American petroleum production levels off rather than maintaining a growth trajectory, the affected midstream MLPs may be forced to cut back on growth capital spending plans. Five years out is hard to plan for, so here are some factors that may help MLP investors determine if longer term distribution growth expectations need to be lowered or changed: An extended period of lower crude prices could result in lower well completion numbers, turning annual production growth into flat or declining production. A related factor would be higher natural gas prices, which could cause energy E&P companies to put more emphasis on drilling for gas instead of crude. Approval to export U.S. crude could change the equation. The PAA numbers point to a glut of light sweet crude in the near future and the ability to export excess production would support both the price of crude and E&P capital spending to increase production. Technology. The shift in the U.S. from a crude importer to potential exporter has been driven by technology that allows new finds to be found and advanced drilling methods to work those finds. Technological improvements to slow the decline of existing wells would completely change the crude production equation. Crude production growth and decline rates will vary significantly from region to region. To be able to grow, midstream MLPs that focus on the higher growth plays have the bet potential to meet their growth goals. Also, changes in crude transport methods, such as rail to pipeline may separate out which companies grow and those that don't if total crude production growth does slow. The point here is that there may be reasons to not count on 20 years of growth capex and distribution growth from certain midstream MLP units. The next two to three years look very positive, but things could start to shift in the later years. After 2016, investors in the crude midstream focused MLPs may need to reevaluate the strength of future crude growth.
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May 30, 2014
The Must Have Financial Metrics for MLP Investing
Evaluating master limited partnership units requires familiarity with a different set of metrics compared to analyzing and selecting corporate equity investments. To get started in MLPs you should understand and be able to look up and compare some basic pieces of financial data about each partnership you research. All of the following metrics can b…
Evaluating master limited partnership units requires familiarity with a different set of metrics compared to analyzing and selecting corporate equity investments. To get started in MLPs you should understand and be able to look up and compare some basic pieces of financial data about each partnership you research. All of the following metrics can be easily found on MLPData.com. Distributable Cash Flow: The returns from MLPs are driven the yield and growth associated with the distributions paid to LP unit holders. Unlike equities, MLP’s can distribute up to 100% of the cash generated by the business. The amount of cash available for unitholders is called the Distributable Cash Flow. Each company reports its non-GAAP DCF starting with Net Income and adding back non-cash expenses such as Deprecation and Interest accruals, and then deducting the Maintenance Capital required to maintain the current assets. The ability to increase DCF is necessary to increase unit holder distributions Distributable Cash Flow Coverage: The DCF coverage ratio is the Distributable Cash Flow for a period divided by the Actual Cash distributions paid to unit holders. A ratio of 1.0x or greater means the partnership generated enough free cash flow to cover the distributions. If the ratio is below 1.0x, the partnership paid some of the distributions out of cash that was not generated by business operations. A high DCF ratio, such as 1.50x, indicates the company has excess cash flow which is being reserved to invest in growth projects or used to support future distribution increases. The ratios can be found on DCF Financials tab on the gray menu bar for individual MLPs. You can compare cash flow calculations and coverage for several time frames by using the pull down menu to the right. Distribution Growth Rates: One factor in the total return of an MLP comes from distribution growth over time. Under the Distributions tab for an MLP you will find listed the quarterly per unit distribution rates, quarter over quarter and year over year percentage changes, and average yield data. Historic distributions, unit price and yields are also show graphically. The Find MLPs top menu bar tab allow you to rank the universe of MLPs – or a focused group of units using the Screener – by the above metrics and others. The total return of an MLP will be largely driven by a combination of current yield and the projected distribution compounded average growth rate – CAGR. The Yield to CAGR tool on the Dashboard allow you to quickly view the spectrum of growth vs. yield possibilities. Hover over any plotted MLP to see its symbol and metrics. The CAGR values used on MLPData.com are future distribution growth projections from Wall Street analysts. Current unit prices and yields are most affected by the market's perception of how fast an MLP will grow distributions in the future. The metrics and MLPData tools covered here allow you sort and compare MLPs. In depth analysis of a particular company would involve determining how the company generates cash flow and what will drive future growth.
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May 28, 2014
Ready to Invest in MLP's? Comparing Direct Unit Ownership with ETFs, ETNs, CEFs and Mutual Funds
Master Limited Partnerships are a type of publicly exchange traded investment which are growing in popularity due to the growth outlook for US energy production, transport and exports. An MLP is a company structured as a partnership with limited partner, and some general partner, units which trade on the NYSE and NASDAQ exchanges. There are several…
Master Limited Partnerships are a type of publicly exchange traded investment which are growing in popularity due to the growth outlook for US energy production, transport and exports. An MLP is a company structured as a partnership with limited partner, and some general partner, units which trade on the NYSE and NASDAQ exchanges. There are several reasons why you as an investor would desire exposure to Energy Master Limited Partnerships: Focused exposure to the energy sector with limited risk associated with commodity price fluctuations. The majority of MLPs provide energy infrastructure services, providing the means to move oil and gas from the well to the end-user. These services are contracted at a fixed rate over multiple years, providing transparent cash flows. Although the price of oil and gas will impact production over the long term, the daily fluctuations do not impact these contracted cash flows. Energy infrastructure is forecast to need over $640 billion capital investment, providing visible growth opportunities for investors. The partnership structure produces attractive tax deferred distribution yields, with a current overall average of about 6%. Many MLPs have business models build around providing steady distribution growth to investors. The combination of attractive yields plus growth offers the opportunity for double-digit total annual returns. There are several investment alternatives, including direct ownership, Closed-End Funds, Exchange Traded Funds, Exchange Traded Notes and Mutual Funds.. Each alternative offers investors an opportunity to create either income or total return exposure to the asset class. Explained here will be a short outline of each option and their respective features. Investment data and return results for each type of investment are available in the linked sections of MLPData.com. Direct Unit Ownership: Instead of stock shares, an MLP issues limited partnership units. Units trade on the stock exchanges and are bought and sold in the same manner as corporate stock shares such as Apple and Google. Owning units directly lets you select specific companies from the 120+ universe, direct ownership is the only investment alternative which offers investors tax deferred income. Building your own holdings lets you pick units to match your goals for distribution yield, growth and regional exposure. However, unit ownership's tax reporting will be more complicated than the 1099 which are usually provided for equity income. As an LP unit owner, you will receive a Schedule K-1 from each MLP listing your share of partnership profits or losses. Direct unit ownership requires either the time and understanding to evaluate individual partnership companies or have access to advice on which units to purchase to meet your investment objectives. Exchange Traded Funds: ETFs provide a low expense way to invest in a specific sector of the market. This type of fund holds investments to match a specified passive or fundamental index. Investment income, such as the distributions paid by the MLPs owned by an ETF, are passed through to investors as dividends. One major difference with MLPs compared to funds investing in stocks or bonds is the tax status of an MLP focused fund. If a fund – including mutual and closed-end funds – has more than 25% of its assets in K-1 reporting investments, the fund cannot use the registered investment company tax exemption rule to not be taxed at the fund level and pass through the tax characteristics to fund shareholders. As result of the tax rule, MLP funds are set up as corporations and incur tax liabilities from unit price gains and K-1 reported profits. The net result is that ETF distributions derived from MLPs are signficanlty lower than those received by direct ownership due to the corporate taxes associated with the ETF structure. An MLP ETF tracks deferred income tax expense on unit value gains and adjusts the share NAV for the future tax liability. If units are sold for a profit or K-1 profits are earned, the fund will pay taxes at the corporate income tax rate. As a result, when the selected MLP index is going up, the tracking ETF return will be about one-third lower. If the MLP index declines in value, the ETF NAV should decline at a slower rate as implied tax liabilities shrink. The dividends paid by an MLP ETF will be primarily (most likely 100%) classified as return of capital. The ROC dividends are not taxable income but instead reduce the investor's cost basis in the fund shares. Exchange Traded Notes: An ETN tracks the value and pays dividends to match the yield of a specified index. However, this type of security is not backed by a portfolio of securities, but rather is a swap used to replicate basket performance, issued as a non secured note by a bank. . For MLP based investments, the tracking ETNs do not have the corporate tax liability issue, so a note will match the performance of the selected index. The dividends paid by an ETN will be taxable income with no breaks from your marginal income tax bracket. An MLP ETN may be a useful investment to get MLP exposure in an IRA where the tax characteristics of the dividends make no difference. Closed-End Funds are actively managed funds with shares that trade on the stock exchanges. CEFs face the same tax issues as ETFs and must also pay corporate income taxes if more than 25% of a fund's assets are in partnership units. Closed-end funds can offset some of the return reduction due to taxes by carrying up to 30% leverage, but often come with much higher expense ratios. CEF shares trade on the stock exchanges, and often the market price will be at a premium or discount to the fund's NAV. The combination of moderate leverage, share discount to NAV and active portfolio selection can provide MLP CEFs with a performance advantage. With 28 different funds, closed-end funds are the largest group of packaged products focused on MLPs. Mutual (Open End) Funds: Unlike the other types of funds, mutual fund investments can be made by direct purchase through the fund company. An advantage of mutual funds is the readily available option to have dividends and capital gains distributions automatically reinvested. Mutual funds may be the best choice for investors who want to set up a periodic investment plan. Mutual funds face the same corporate tax challenge as do ETFs and CEFs. The Find Funds page on MLPData.com provides the tools to screen funds by type, size, performance and yield. As with all site pages, individual columns allow you to fine tune your searches by ranking any column.
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May 23, 2014
2014 NAPTP Conference Summary
This year’s National Association of Publicly Traded Partnerships conference came to a conclusion on Thursday, 5/21, after two days of company presentations, 1-on-1 meetings and expert panels opining on tax issues, packaged product growth and the future ownership structure models. The conference moved down from Stamford to Sawgrass, providing a more…
This year’s National Association of Publicly Traded Partnerships conference came to a conclusion on Thursday, 5/21, after two days of company presentations, 1-on-1 meetings and expert panels opining on tax issues, packaged product growth and the future ownership structure models. The conference moved down from Stamford to Sawgrass, providing a more comfortable and scenic venue to handle the expanding crowd. The audience continued to be dominated by Investment Bankers and Analysts, with a low percentage of the 1000+ attendees being individual investors and Registered Investments Advisors, the constituents who will be the key to future growth as more equity is issued to meet the $640 billion of estimated growth projects over the next 10 years. Over 65 MLPs, including Kinder Morgan, Linn Energy, Hi-Crush, Emerge and many others provided the audience with an update on their assets, growth initiatives and volumes with a focus on the high growth shale plays of Utica and Marcellus. Overall, midstream MLP’s continue to show a path to transparent and double digit distribution growth. Those with assets in the key regions are poised to grow significantly, while others are looking to expand their footprint to generate future growth. In light of the overabundance of information shared, the following are a few key highlights which shaped our outlook by the end of the conference: Institutional Ownership increased by 24% over the previous year, while units issued increased by 6% From a regulatory perspective, the “world is a safe place for MLP’s” – David Oelman, Vinson & Elkins. The IRS pause on Private Letter Rulings is “not a question of whether MLPs should exist, but rather what is the incremental size of the universe”. Midstream C-Corp asset owners are increasingly considering the MLP structure to maximize shareholder value. High growth MLP’s, such as Oiltanking Partners, Hi Crush, Emerge and MPLX, were well attended sessions MLP’s continue to show lower correlations to interest rates over the long term, but increasingly are impacted by equity volatility, a trend likely to continue with packaged product ownership Fund Flows continue to grow, with an expanding interest from foreign investors, particularly the Japanese market. Investors need to be aware of the 3.8% income tax surcharge above $250k, which also applies to MLP passive income A few noteworthy comments made during the company presentations: TC Pipelines along with their parent TransCanda, continue to develop alternative plants for Keystone. Tar sands will make it to market, by rail or barge if necessary. Linn Energy, 12 hours after announced the Exxon Mobil swap, were optimistic about their swap, but mentioned that the remaining acreage has a higher allocation of capital expenditures, which may offset the benefits of the swap. Kinder’s CFO Kimberly Dang aggressively defended the ability for KMP to generate high ROI despite their 9% cost of capital. Dang reiterated the position that owning KMI presumes that you believe in KMP’s growth. The merging of KMP with El Paso Pipeline Partners would not yield much synergies beyond the costs associated with exchange listing and tax preparation. No KMI dropdowns are planned from the two remaining operating assets. KMP’s $5 billion Trans Mountain pipeline is expected to have a regulatory decision by July 2015. Overall, the expansion of energy production and infrastructure continues to provide a compelling thesis for initiating and expanding portfolio exposure to the MLP asset class. At some point, the growth will stabilize, which will alter the valuations for many MLP’s. The crystal ball debate is how far into the future that may be. From the data presented over the duration of the conference, it seems apparent that the next 3 to 5 years will continue provide higher growth for many Master Limited Partnerships, offering investors the opportunity for double digit tax deferred income and total returns.
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May 21, 2014
Allocating To Energy Infrastructure? MLP Index Selection Matters
Summary RIA's and investors can choose from 65 ETFs, ETN, CEFs and mutual funds focused on MLP investing. ETNs provide the most efficient beta matching returns based for their respective MLP index. Selecting the appropriate MLP Index is critical, performance can vary by up 10%. The Miller/Howard MLP index adds fundamental criteria to the select…
Summary RIA's and investors can choose from 65 ETFs, ETN, CEFs and mutual funds focused on MLP investing. ETNs provide the most efficient beta matching returns based for their respective MLP index. Selecting the appropriate MLP Index is critical, performance can vary by up 10%. The Miller/Howard MLP index adds fundamental criteria to the selection of index constituents, which incorporates forward metrics for selection. As evidenced by the monthly $1.5B of capital fund flows , the broader investment community is taking notice of the growth opportunities associated with the $700B estimated capital expenditures for North American energy infrastrucutre. A plethora of alternatives are available to invest in the expansion of US energy infrastructure by way of publicly traded Master Limited Partnerships. Although only 115 exchange traded MLPs are available to investors, there are over 65 packaged products including 7 ETFs, 12 exchange-traded notes, 18 mutual funds, and 28 closed-end funds offering investors a broad spectrum of passive index and actively managed products. Several Exchange Traded Funds and Notes let investors gain beta exposure to this asset class using several different active and passive strategies. The introduction of new index methods further offers investors alternative approaches to optimize exposure and performance. Today we begin a series on these on these alternatives, starting with a comparison between the most recognized and utlized benchmark, the Alerian Cap Weighted Index, and the recently introduced Miller/Howard MLP Fundamental Index. The former is the pioneer benchmark for performance measurement with over $16B of AUM linked to the index family. Miller Howard is a well established asset manager positioned to offer RIA's and retail investors a broader set of investment vehicles to access the MLP sector. The Miller/Howard MLP Fundamental Index is new to the market and is the performance benchmark for one product, Citi's Exchanged Traded Note. Our analysis will focus on the index rules and composition to assess which offers investors a greater opportunity for total return and income exposure. Alerian MLP Index Overview The AMZ is a float-adjusted, market cap-weighted index tracking 50 Master Limited Partnership units. The top three constituents of Enterprise Product Partners LP (EPD), Kinder Morgan Energy Partners LP (KMP) and Plains All American Pipeline LP (PAA) account for 32% of the index value. The top 10 MLPs cover 61% of the index. The market cap weighting produces to a midstream focus with 85.6% of the index value in the petroleum transportation, natural gas transportation, and gathering & processing sectors. As of March 31, 2014, AMZ had a reported yield of 5.8%. Linked investment products: JPMorgan Alerian MLP Index ETN (AMJ) ETRACS Alerian MLP Index ETN (AMU) Note: the Alerian Infrastructure MLP Index - AMZI - is the target index for six funds and ETNs. AMZI has 25 constituents including the same top 10 as AMZ. The below table illustrates the AMZ constituents and their yield and distribution CAGR growth rates. Miller/Howard MLP Fundamental Index MLPMP is a 25 constituent modified, equal weight index with the included MLPs selected by ranking the class using a set of fundamental criteria. The selected MLPs include 15 large cap companies, each with a 5% weighting, and 10 mid to small cap MLPs weighted at 2.5% each. The index methodology initially screens the MLP universe based on based on market capitalization, distribution cuts, and liquidity, producing a list of 50 eligible MLPs. That list is then ranked by the following criteria: Trailing Twelve Month Distribution Growth Fiscal Year Estimated Capital Expenditures Trailing Twelve Month Distribution Coverage The ranking of MLPs for selection as index components use a rulebook methodology to rebalance constituents on a quarterly basis. Index rules require that 70% of the weighting go to midstream MLPs, with the downstream and upstream sectors limited to a maximum of 15% each. The top-rated MLPs from the large and small-mid cap groups are selected as the index components. As of March 31st, 2014 the MLPMP reported yield was 6.1% vs 5.8% for the AMZ. Linked investment products: C-Tracks Exchange-Traded Notes Based on the Performance of the Miller/Howard MLP Fundamental Index (MLPC). â?? Comparing Total Return Potential Although MLPMP launched in August 2013, Miller/Howard back-calculated the index to November 2008. The historic 5-year average annual return through 12/31/2013 was 35.24%. For the same time period the AMZ averaged 29.55% and the S&P 500 returned 17.94%. As forward distribution growth is the primary driver of MLP total return, using TTM Distribution growth is a reasonable proxy. Distributable cash flow growth is generated by an increase of capital spending, so the capital expenditures criteria provides a measure of an MLP's future growth prospects. The MLPMP fundamental focus shifts performance results away from the large cap results of AMZ to MLP's that are providing above average and sustainable distribution growth. In the two tables listed above, MLPMP and AMZ have similar average TTM distribution growth rates, at 6.96% and 7.33%, respectively. However, when the weighted growth rates were calculated, MLPLP increased to 8.28% and AMZ dropped to 7.09% growth when compared to the simple averages. With the small number of MLPs with which to build an index, there is a large crossover between AMZ and MLPMP. 24 of the 25 MLPMP constituents are included in AMZ. To a great extent, performance differences will come from the weighting. The second factor to produce better returns from MLPMP would be the screening out of companies with low or no distribution growth. Below are two charts plotting MLP yields and 3-year forecast distribution CAGR. The first shows all of the AMZ components. The second plots the MLPMP constituents. For a rough comparison note the position of the 5% CAGR line. As illustrated, a greater % of the MLPMP index is characterized by higher forward growth distribution estimates than that of AMZ. Advisors and investors who are looking to gain exposure to this asset class are well served by first selecting the index which best aligns with the investment objective. Often, fees, spreads and AUM are primarily selection criteria, which are less dominant factors in realizing maximum total return within the Master Limited Partnership niche. For further analysis, please check out the Find Funds tab on MLPData.com
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Apr 21, 2014
A Quantitative Look at IDRs and Their Impact on MLP Growth
Summary 87% of midstream MLPs pay Incentive Distribution Rights to a General Partner, which can warrant up to 50% of the incremental distributable cash flow. Five midstream MLPs do not have IDR structures or make any extra payments to a General Partner. MLPs with Incentive Distribution Rights are able to grow distributions at similar rates as th…
Summary 87% of midstream MLPs pay Incentive Distribution Rights to a General Partner, which can warrant up to 50% of the incremental distributable cash flow. Five midstream MLPs do not have IDR structures or make any extra payments to a General Partner. MLPs with Incentive Distribution Rights are able to grow distributions at similar rates as those without IDRs for a period of time, but scale matters. An oft-debated component of the partnership agreement between the General Partner and Limited Partner is the role and impact of Incentive Distribution Rights. The IDR schedule dictates how incremental distributable cash flow generated by the LP will be allocated to the General Partner. The cumulative IDR payment to the GP increases if the LP distribution rate is increased and/or more LP units are issued to raise capital. At first glance, the IDR burden would suggest that partnership agreements which incorporate such a structure would have a much higher burden to increase distributable cash flow in order to increase distributions to LP units. In the midstream sector of over 60 MLPs, only five partnership agreements do not have an existing IDR clause. These units are Enterprise Product Partners (EPD), Buckeye Partners LP (BPL), MarkWest Energy Partners LP (MWE), Magellan Midstream Partners (MMP) and Genesis Energy LP (GEL). Some investors expect units which have a proven management team, healthy assets and low leverage should produce higher distributable cash flow growth over units burdened with an IDR, particularly at the high split rate of 50%. We considered such expectations and developed a peer group to compare midstream units for those that have IDRs against the minority group which do not have IDRs. The key comparative metrics are yield, coverage ratios, 3-year DCF CAGR growth and Trailing Twelve-Month returns, which would provide us with a snapshot to compare growth and total return performance. The two charts show the comparison between IDR units and those without IDRs: The short list of IDR free units consist of those with superior metrics, each with a history of steady distribution growth and strong returns for unitholders. This minority group of units offer yield vs. forecast distribution CAGRs that plot into the middle of the range available from the full list of midstream MLPs. The plot below of units indicate that both peer groups offer high CAGR growth rates and commensurate yields. On the chart below, the no-IDR units are indicated by circles. IDR Impact on Growth Capital Capital to fund growth projects is often raised from issuance of new LP units and debt. The cost of capital is a proportional rate of the LPs' interest paid on debt and the distribution yield on the units. If IDRs are applicable, the equity cost will include the IDR payments on the newly issued partnership units. The effect of IDR payments depend on the current LP unit yield and the quarterly distribution rate compared to the IDR tier structure. Two examples are used to illustrate: Access Midstream Partners LP (ACMP) yields 3.9%, based on the current $0.56 quarterly distribution. ACMP's top 50% IDR split is paid on the distribution above $0.50625. Calculating IDR costs using all of the tier percentages results in an equity cost of capital for ACMP of 4.55%. The IDR payments add 0.65% for ACMP at the current distribution yield. Stated another way, for every $.01 that ACMP raises the distribution for LP units, the actual distributions it makes is $.02, with the other $.01 being paid to the GP. Access Midstream Partners is a high-growth MLP, and IDR costs have had a negligible effect on the unit's ability to finance its growth, in part due to the minimal difference between the distribution rate and the high split tier. As the distribution grows over time, this cost of capital will increase as the 50% split paid to the GP increases and the cumulative effect is realized. Kinder Morgan Energy Partners LP (KMP) yields 7% with the recent $1.36 distribution. The KMP 50% IDR split is on distributions above $0.23375 per quarter, subjecting $1.13 of the current quarterly distribution to the high split rate. The high distribution rate in relation to the top split rate make IDR payments a significant factor in the cost of equity capital for Kinder Morgan Partners. If the market decides that an MLP should trade at a higher yield due to lower growth, coverage, or leverage concerns, the resulting decline in the unit price can disrupt the cycle of growth for the partnership. For example, KMP at $77 and a 7% yield must issue 17% more LP units to raise the same amount of capital than at a $90 unit price and under 6% yield. More importantly, distributions and IDRs must be paid on all of those additional units. If DCF estimates for a project were based on the $90 figure, the accretive DCF to increase the distribution rate will be lower if KMP ends up issuing units at the lower price, making it more challenging for the company to meets its distribution growth forecasts. Factors such as a higher DCF coverage ratio - which allows the unit to fund growth without issuing more debt/equity - or a temporary waiver of IDR payments can help the LP balance the impact of a declining unit price when it needs to raise capital. However, if a higher cost of capital does lead to lower distribution growth, the growth cycle will slow, making it difficult for an MLP to find highly accretive projects which can propel distribution growth. How are IDR Units able to maintain high growth rates? The IDR model is most effective when the GP/Sponsor has inventory, or access to assets with long-term EBITDA cash flows which can generate a premium when dropped from a Sponsor C-Corp into an MLP structure. When this occurs, an independent auditor assigns a fair value to the assets being sold from the GP Sponsor to the LP. If necessary, the LP finances the purchase with available cash, revolver credit, debt and/or equity issuance. After such financing and maintenance capex expenses, the EBITDA cash flows are accretive to the LP unitholders, and the GP participates in that accretion with the IDR split. Therefore, the key relationship is between the fair value transaction price and implied cost of capital. These factors are balanced with the incentive to generate accretive cash flows which benefit both the GP and the LP. Evidence suggests that a broad set of MLPs with IDRs have been, and are forecast to, generate double-digit DCF growth numbers, similar to units without IDRs. Motivated GPs who are able and willing to drop assets into the LP can often offset the IDR burden for a period of time. Therefore, when analyzing an LP for investment, one should understand the GP's assets, EBITDA inventory, and motivation for supporting the LP units to gain confidence in the long-term DCF growth rates, the dominant factor for total return.
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Apr 11, 2014
Product Launch
In the two months since we launched MLPData.com, we have heard from hundreds of market participants who seek further tools and resources to support their investment process for Master Limited Partnerships. Each day we provide a growing audience with data and analytics to Educate, Select, Analyze and Monitor MLP investments. Most content, brokerag…
In the two months since we launched MLPData.com, we have heard from hundreds of market participants who seek further tools and resources to support their investment process for Master Limited Partnerships. Each day we provide a growing audience with data and analytics to Educate, Select, Analyze and Monitor MLP investments. Most content, brokerage and market data platforms do not accurately provide the necessary information to support investment in this rapidly expanding asset class. We have been busy developing what we believe, and you are telling us, is the most advanced MLP analytics platform available. So here is the new set of features available and we have many more ideas in the pipeline: Scans – drill down capability which quickly enables analysis of aggregate and unit yield changes using Year over Year, Quarter over Quarter and Year To Date intervals. Filter on Historical and Forecasted distribution growth, Coverage, and low tier IDR payouts to identify units of interest. Earnings Call Notes – chronological record of key metrics and guidance provided by management during the earnings call release and Q&A. Track the evolution of the metrics over time and management’s ability to deliver on forecasted EBITDA, DCF and leverage targets. Yield to CAGR chart – we aggregate the leading MLP analyst CAGR rates and plot against the real time yield of units. Whether you assess the market top down or bottoms up, these charts will provide visual transparency of changing market conditions. Yield to Coverage – a compliment to Yield to CAGR, this chart plots the real time yield against the trailing twelve month company reported DCF coverage with full drill down capabilities into DCF composition. Forecasted Returns – the market at times is fixated on the impact of rates, in this application, we calculate forward total returns using prevailing yield levels, or user defined levels, which allow one to forecast total returns under different yield scenarios. This application is further supported by our spread charts which provide historical relationships between a unit’s yield and several benchmarks. Cash Flows – enhancements to the existing capabilities show Pie and Bar chart composition of Net Income, Maintenance Capital, DCF and Annualized Distributions to enable investors to understand the operational Cash Flow sources and companyprovided DCF adjustments. Closed End Fund Premium/Discount Analytics – identify directional NAV and trade divergence for short term opportunities. View which funds have expanded or contracted their discount relative to a peer group over a Day, Week, Month and Year to Date. In addition, we are working on a few new features to be launched in the coming weeks, including Asset Purchases and Accretion calculators to quickly determine future cash flow growth Portfolio attribution reports which use metrics unique to Master Limited Partnerships K1 Aggregation capabilities to streamline reporting for investors and SAM/UAM managers Institutional Ownership changes by ticker and sector Perhaps you are wondering what is the business model for MLPData? Shortly, once we have further refined all of the capabilities, we will be rolling out a subscription service which will be necessary to access a subset of the current and future capabilities. You will continue to have free access to a portion of the site, but we hope you find the extended site worthy for payment. In the meantime, please continue to provide us with suggestions and ideas to further improve MLPData and we appreciate your support MLPData Team
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Apr 11, 2014
MLPData Intelligence Quarterly
The Alerian AMZ and S&P500 had near parity (1.15% vs 1.30%) for Q1 performance, but the benchmark index did not reflect the overall performance of the sector. 25% of the MLP units had a Q1 total return in excess of 10%, while 30% of the units had a negative total return. Average yield closed at 6.18% with 3 Year DCF CAGR of 7.13% providing the…
The Alerian AMZ and S&P500 had near parity (1.15% vs 1.30%) for Q1 performance, but the benchmark index did not reflect the overall performance of the sector. 25% of the MLP units had a Q1 total return in excess of 10%, while 30% of the units had a negative total return. Average yield closed at 6.18% with 3 Year DCF CAGR of 7.13% providing the potential for another year of double digit total returns. Performance was led by the movement out of high yield/low coverage units to those with visible double digit CAGR growth. Q4 earnings calls were impacted by weather related supply challenges and an uncertain outlook for inventories. With 10 year rates relatively unchanged, distributable cash flow growth was the market focus, distracted at times by the financial and social media headlines related to Kinder Morgan and Boardwalk partners. Top 10 MLPs The top two units for Q1, Emerge Energy Partners LP (EMES) and Tallgrass Energy Partners LP (TEP) came into the market with mid-2013 IPOs. As often with new issues, the market took time to digest the EBITDA and DCF growth opportunities and moderate the potential execution risk associated with the new cash flows. The top 10 performers based on Trailing Twelve Month total return all exhibit a similar high growth CAGR outlook as illustrated in the chart below. Funds Aggregate Fund Flows accelerated to a $1.2B net monthly flow rate, with Mutual Funds continuing to gather the majority of the assets over Exchange Traded Funds and Notes. Approximately $15B TTM of fund inflows attracted further issuance of 6 new funds focused on master limited partnerships. Active management continued to outperform the passive cap weighted beta strategies of the AUM leading ETF/ETNs, the latter burdened by the 12% weighted exposure to negative performance of the Kinder Morgan constituents EPB and KMP. Fundamental indexing and DCF growth strategies as an alternative to current yield maximization provided investors with a superior total return performance in all categories of packaged products.
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Feb 24, 2014
Volatility and Opportunity
Since the launch of MLPData the sector has seen volatility driven by both the bull and bear views of the macro and micro environment for Master Limited Partnerships. The passive beta approach to MLP exposure is unlikely to perform as it has in the recent past, and investors need to conduct greater due diligence to achieve double digit total return…
Since the launch of MLPData the sector has seen volatility driven by both the bull and bear views of the macro and micro environment for Master Limited Partnerships. The passive beta approach to MLP exposure is unlikely to perform as it has in the recent past, and investors need to conduct greater due diligence to achieve double digit total returns in 2014. In order to facilitate this due diligence, we will be releasing a set of new tools which will help identify the most appropriate MLP's for your investment objective. Here is a brief overview of our short list: Closed End Fund Analytics - daily, weekly, and monthly changes to premium/discount spreads relative to historical and peer group averages. MLP Yield Scans - daily, weekly and monthly changes to distribution yield compared to historical and peer group averages MLP CAGR/Yield Scans - plot of 3 Year CAGR distribution growth rate against current distribution yield MLP Coverage Ratios - identify units with highest TTM coverage ratio and yields Expected Returns - determine price and distribution returns using forecasted CAGR rates and expected yields Risk Notes - key risk metrics and issues associated with each MLP We hope that these new features, along with the existing set of DCF, Coverage and Distribution analytics, will further provide investors with greater transparency to select, analyze and monitor Master Limited Partnerships and packaged products. MLPData Team
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Feb 07, 2014
MLP's: An Important Cog to North American Energy Infrastructure Expansion
The resurgence in U.S. oil and gas production has garnered growing attention from both the financial and mainstream press. The ongoing and potential benefits of new energy plays and advanced drilling techniques include reduced dependence on foreign energy sources, lower energy costs in the U.S. and a return of manufacturing to the U.S. due to low…
The resurgence in U.S. oil and gas production has garnered growing attention from both the financial and mainstream press. The ongoing and potential benefits of new energy plays and advanced drilling techniques include reduced dependence on foreign energy sources, lower energy costs in the U.S. and a return of manufacturing to the U.S. due to low costs for power and petroleum derived raw materials. The Master Limited Partnership structure is primarily utilized by companies operating in the "depletable" energy or commodity sectors. MLP's play an important role in the function of the U.S. energy sector. These publicly traded partnerships offer alternative ways to invest in North Ameriican energy production and infrastructure without exposure to a global portoflio of assets which may be less attractive. Year-to-date — as of mid-day February 3 — the Energy Select SPDR (XLE) value has dropped by 6.8%. In contrast, and showing the strength of the MLP group, the JP Morgan Alerian Index ETN (AMJ) is down by just 0.56%. Looking at the overall market, the SPDR S&P 500 (SPY) has lost 5.0% year-to-date. Focus On Midstream Infrastructure Assets Midstream is the traditional sector of the energy business for MLP organized companies. The midstream companies provide gathering, processing, transport and storage services to move oil and gas from the wells to the end users or refineries. Midstream companies make up about 60% of the total number of listed MLPs. Features of the midstream MLP sector include: Steady and predictable revenue streams, often fee-based rather that exposed to commodity price risk. Attractive dividend yields combined with management objectives to steadily increase the distribution rates, with a significant number of MLPs increasing the payout to investors every quarter. Revenue and cash flow growth comes from either the development of organic midstream projects or the acquisition of existing assets. Publicly traded general partner companies — as either MLPs or corporations — provide investment opportunities in accelerated dividend growth from the incentive distribution rights owned by the GPs. Most of the largest MLP companies focus on midstream operations including Enterprise Products Partners L.P. (EDP), Kinder Morgan Energy Partners L.P.(KMP), Williams Partners L.P. (WPZ) and Energy Transfer Partners (ETP). Attractive Yields From Other Value Chain Segments The remainder of the energy MLP universe covers the rest of the energy sector business types with a few extra bonuses. Upstream MLPs own producing oil and/or natural gas assets. These companies proportionaly hedge the value of future production to provide high yields to investors backed by the sales of crude and natural gas production. Downstream MLPs refine crude oil into fuels and specialty products. Both steady dividend payments and variable 100% of net cash flow distribution schemes are available from this group of MLPs. Specialty and highly-focused MLPs let investors participate in the profits of fertilizer and chemical production, retail propane sales, mining royalties and specialty services or products for energy drilling operations. The numbers and types of services available as MLP investments continues to grow as new Private Letter Ruling requests are made to the IRS seeking qualifying partnership opinions on an evolving set of energy related products and services. Issuance and Investor Base is Expanding 2013 produced a record number of MLP IPOs with 20 new offerings and total equity issuance nearing $30B. Corporate energy companies are actively assessing the shareholder benefits of forming an MLP as an option to maximize shareholder value and allow investor's to choose the assets aligned with their objectives. A recent Wall Street Journal article highlighted the growth of MLP focused ETFs and mutual funds. The article stated that $15.7 billion of new money went into these funds last year brining aggregate AUM to over $53B. Whether an investor chooses to own MLP units directly, invest in GP companies or through packaged fund products, the combination of attractive yield and growth opportunites position MLP's as an attractive component to a diversified investment portfolio.
