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MLP Weekly: Production Turns

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The benchmark index nudged slightly higher .08% as crude traded unchanged and Natural Gas fell nearly 5% as Winter weather continues to forecast warmer Northeast temperatures.  Rig count increased by 35, the largest weekly gain in five years.  Monthly production estimates from the EIA indicate that all but two basins will have flat or increasing production by February, while Year over Year volumes remain 5% lower




The IRS released their Regulations for Master Limited Partnership Qualifying Income, the agency's first set of rules since imposing a pause on the Private Letter Ruling process, the previous method used by prospective MLP issuers to discover how the IRS would regard income associated with energy related assets.  Latham and Watkins will host a Webcast to review the implications, which put at least one MLP, SunCoke Energy Partners, at risk.   The Sponsor, SunCoke Energy. proposed in late October to swap all outstanding SunCoke units for 1.65 shares, at the time with an implied value of $17.80, presently valued at $17.00, a 5% discount to the most recent close.  



Unit News



Noble Midstream's Sponsor announced the acquisition of Clayton Williams for $2.7B in cash and stock, adding 71,000 acres from the Delaware Basin.


Viper Energy Partners priced 8.5MM new units at a 7.3% discount, expected to close on January 24th.  Viper also announced volumes have increased 27% from Q3 with average realized total equivalent prices up 10% during the same period.  


Sunoco LP announced a strategic process to sell for over 100 real estate assets, which includes company owned locations, undeveloped sites and other excess real estate assets.


Valero Energy Partners  announced that it has acquired a 40 percent undivided interest in the Hewitt segment of Plains All American Pipeline's Red River pipeline for approximately $70 million.  The Hewitt segment is a newly constructed 138-mile, 16-inch crude oil pipeline with 150,000 barrels per day of capacity.  The purchase also includes a 40 percent undivided interest in two 150,000 shell barrel capacity tanks located at Hewitt Station. .  The pipeline began supplying crude oil to Valero’s refinery in Ardmore, Oklahoma in January 2017.


Tallgrass Energy Partners announced that is has reached a settlement with Ch 11 operator Ultra Petroleum over fees owed to the Rockies Express Pipeline prior to Ultra's Chapter 11 filing.  .  Tallgrass is expected to receive $150MM by October 2017 and has entered into a new 7 year midstream agreement with Ultra, commencing December 1st 2019, which is expected to generate $26.8MM annually for West to East capacity of 200,000 dekatherms per day..  


Plains All American Pipeline is expanding the capacity on its Cactus pipeline from McCamey to Gardendale, Texas to approximately 390,000 barrels per day. The expansion will allow PAA to move increasing production volumes from the Permian Basin to Corpus Christi and other delivery points along the system. The expansion includes manifold and metering enhancements at our origination station which are anticipated to be completed in the third quarter of 2017.



Q4 Distributions


The following units reported a Quarter over Quarter increase in their distribution rates.  Premium subscribers can access the Forecast page which provides expected growth rates and total returns.





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