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MLP Weekly: Management Comments

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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








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