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MLP Weekly: Follow Through

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Large Cap units gained this week as crude held gains from the Non-OPEC announced production cuts in a calendar month that usually is weak for units.  The benchmark index gained 1.22% advancing the YTD total return to 14.23%.   Cabinet and Agency appointments from the new Administration could not be more friendly and aligned with US energy infrastructure, which to date, has had little impact on unit prices since the Election.  Perhaps the market is awaiting to see 2017 guidance and fundamental follow through before they deploy new capital into MLPs.  Other investors may remain concerned about risks, reinforced by the fact that 3 of the 6 largest MLPs have been involved with actions which have reduced distributions or expected growth rates.  






Unit News


EQT Midstream announced they expect 2017 Adjusted EBITDA to be in the range of $670MM - $710MM, a 21% midpoint increase over 2016, of which 80% of the revenues are generated under firm reservation fees under long term contracts.  Management expects to increase distributions 15-20% in 2018 and forward for several years.  The GP, EQT GP Holdings, is expected to increase distributions 30-40% for the same period.  


Williams Inc announced that Michael Creel, the recently retired CEO of Enterprise Products Partners has been appointed as an Independent Director.  A few months back, Enterprise considered a bid for Williams, fueling speculation that Creel could help facilitate a future transaction.


Energy Transfer extended the DAPL Sale's Outside Termination Date from December 31st  to March 31,2017 in order for the closing conditions to be addressed.  


Spectra Energy and Enbridge shareholders approved their merger, which is expected to close Q1 2017.




MLP Taxation


A recent Barrons interview with noted Tax expert Robert Willlens offers insight into the potential impact on Master Limited Partnerships if the pass through and corporate tax rates were adjusted lower, both of which are part of the House plan..  



Wood Pellets


The EIA released their survey of wood pellet production, which includes 120 planned or operational facilities with total capacity of 11.4MM tons.  Presently, 3.3MM tons are produced annually with 3.1MM exported to the UK's Drax power plant.  


Enviva Partners, an MLP which owns pellet production, transport and export facilities, presently produces 70% of the overall US production, all of which is exported to the UK.  Due to the regulatory nature of the export demand, Enviva has no exposure to energy prices and has outperformed the majority of units over the past twelve months






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