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  • MLP Intelligence: Management Speaks [View article]
    On NGLS call, management discussed 3-5% volume increase for 2015 and 70% of 2016 fee based...4% growth guided this year, next year has much risk with 1.1x coverage
    Aug 4, 2015. 09:11 PM | Likes Like |Link to Comment
  • MLP Intelligence: Management Speaks [View article]
    There are quite a few additional conference calls which all point to the same risk, which is management does not know how current prices will impact 2016 volumes. If you overlay the change in contract terms, there is a very good possibility that EBITDA could be lower in Q1 of 2016 for many midstream units. With equity no longer an option to raise capital, those with strong coverage and leverage will be the safest, but they too will have further downside.

    An MLP Portfolio needs to be protected against $50 oil through 2016 and new money will only be attracted once the risk of lower prices is either realized or subsides
    Aug 4, 2015. 01:35 PM | 1 Like Like |Link to Comment
  • MLP Intelligence: Management Speaks [View article]

    Thanks for taking the time to provide feedback. We will submit the correction for 2016. On the latter point, regarding "On Following Marathons Growth Strategy for MPLX0', the views from PSX/PSXP were in regards to questions posed to them about whether they would make such a transaction as this has been a market concern for all of the large sponsor drop down units since MPLX changed their strategy. We will submit a sentence which clarifies the connection between the headline and comments
    Aug 2, 2015. 03:40 PM | Likes Like |Link to Comment
  • The Last MLP Safe Haven Is Now At Risk [View article]
    If the company is producing positive free cash flow, the bonds are safe as the MLP can always lower or suspend the distribution to service the debt. In the case of Linn and others, once the hedges roll off and the company will realize much lower prices, the interest payments and the capital structure allows no room to finance the gap
    Jul 27, 2015. 08:56 AM | Likes Like |Link to Comment
  • The Last MLP Safe Haven Is Now At Risk [View article]
    Regarding lower prices and volumes, take a look at EQT Corp and their midstream MLP EQM. EQT, the driller, reported a 34.5% quarter over quarter increase in production volume, but realized a 53% reduction in price, leading to an operating loss of $69MM for the quarter. Midstream gathering revenues were 35% higher along with a 19% increase in midstream transmissions. So the question is how long can EQT continue to produce gas at a loss? At some point, they will be capital constrained and will need to reduce production to reduce the loss. When this happens, there is less volume over the pipes and distributions will have peaked at best. This quarter will be very ugly for producers and if strip prices continue, 2016 will be a year of less drilling and the market will project lower midstream growth, which will further lower prices
    Jul 27, 2015. 08:51 AM | Likes Like |Link to Comment
  • The Last MLP Safe Haven Is Now At Risk [View article]
    Our view is that the commodity price outlook shifted in June, when market expectations were of higher crude in late 2015/mid 2016. Although midstream is not correlated to price, lower price means less drilling and lower volumes over time, which translates to lower growth. The market is now assuming that midstream MLP's will be challenged to expand distributions in 2017 IF prices do not recover. Some consider M&A a catalyst, but if you look at the deals, most LP's have not had any material benefit from such activity. Add the prospect of higher rates, and you have a very negative outlook for which the risk premiums are adjusting with a lack of new fund flows to step into the market. From the SA community, it appears few are adding to their positions given the weakness, which in turn gives the market an excess of sellers. Those who have large MLP portfolio's should be hedging against persistent or lower commodity prices in 2016, which must be done with direct futures contracts. If you had used this hedge over the past three years, you would have greatly reduced your risk at a very low expense.
    Jul 25, 2015. 08:42 AM | 1 Like Like |Link to Comment
  • The Last MLP Safe Haven Is Now At Risk [View article]
    The higher coverage ratio allows management to maintain or grow distributions at shorter term lower levels of cash flows, which implies more stable growth. That's the theory, but EPD is now down nearly -22% YTD and -25% TTM and forward yield is now nearing 2011 levels, with a 10% reduction in distribution growth. When looking at the coverage to yield relationship and yield to growth, the real fundamentals and risks are not represented in current prices

    Prices reflect fear and there is a scarcity of buyers, with negative fund flows...too bad SCO is a bad hedge to protect against oil correlation
    Jul 22, 2015. 10:25 PM | 1 Like Like |Link to Comment
  • The Last MLP Safe Haven Is Now At Risk [View article]
    Agreed, safe for distributions, but increasing risk for yield spread expansion as the market will continue to assign greater risks to future cash flows if energy prices persist in current range. The high coverage ratios have offered little downside protection to principal

    The drop down units had not been exposed to these risks given the EBITDA inventory and low leverage, but now that MPLX has changed their approach for growth, the others are now suspect and the total return strategy is now broken..even before high rates adjust the market further
    Jul 22, 2015. 07:33 AM | 2 Likes Like |Link to Comment
  • Is MarkWest Energy Partners Throwing In The Towel? [View article]
    Agree that MPLX is on a different growth trajectory past 2017. VLP, SHLX, PSXP, DM, the previous MPLX peer group, projects 20% growth well past 2017. MPC will need to drop down a very large set of assets to move the needle past 10% growth with a unit base of almost 300MM, vs the 80mm units presently, which is why it will remain at these levels. MPC is the winner here, and once again the LP unit holders are not.
    Jul 14, 2015. 06:54 AM | 3 Likes Like |Link to Comment
  • MLP Weekly Intelligence: Catalyst Wanted [View article]
    We will be publishing a select group of Fund Xrays on Seeking Alpha, which will provide forecasted distribution growth rates associated with each portfolio, which should help investors understand the future performance of each MLP ETF, Closed End Fund and Mutual Fund. MLP portfolio managers are challenged to increase yield without taking on significant principal risk, so understanding the balance of the portfolio is more relevant today than it has been for the past three years
    Jul 1, 2015. 07:03 AM | Likes Like |Link to Comment
  • Hi-Crush Partners Is A Win For Income And Value Investors [View article]
    The risk with HCLP and EMES is that they continue to "negotiate" their take or pay contracts, which were previously positioned as guaranteed payments. They are lowering price by 30% and extending terms. If current gas and oil prices persist, they will continue to get further squeezed like all other service providers. Q2 performance will be telling as to whether these discounts are expanding. Above these specific issues is the expanding risk premiums associated with MLPs, which are lowering prices. Both management teams have suggested that the market needs to reward their distribution growth otherwise they will modify their growth plans given the high expense associated with issuing new units. Much greater risk with EMES
    Jul 1, 2015. 06:58 AM | Likes Like |Link to Comment
  • MLP Weekly Intelligence: Catalyst Wanted [View article]
    GLOG will be the higher growth vehicle as you correctly clarified
    Jun 30, 2015. 10:05 AM | 1 Like Like |Link to Comment
  • MLP Weekly Intelligence: Catalyst Wanted [View article]

    We agree the drop is accretive, but LP owners paid a higher price for the asset with greater re-contracting risk than their GP did just a year ago. GLOP is down -33.4% on a total return basis due to the expectations of slower distribution growth. Given 1.91 pa and IDR tiers, GLOP will be taking a greater share of GLOP distributions and should be the higher growth vehicle.
    Jun 30, 2015. 08:35 AM | 2 Likes Like |Link to Comment
  • MLP Weekly Intelligence [View article]
    The market certainly responds to short term commodity price changes despite their impact on the 12 month short term. However, over time, the market is adjusting to, if these current levels prevail through Q3 2015 or later, the lower growth rate for midstream MLP's which are reliant on organic projects for growth. With low commodity prices and the prospect of higher rates, it is wise to develop a portfolio which is comprised of MLPs with drop down growth along with high yielding lower growth units
    May 29, 2015. 08:14 AM | Likes Like |Link to Comment
  • MLP Weekly Intelligence [View article]
    Not all MLP midstream MLP's have reacted poorly to the adverse price conditions. Although most have no price exposure, they do have volume exposure. Each MLP has a set of assumptions about future distribution growth. If those assumptions change (or more likely mgt adjusts or comments on guidance), the current price will adjust down to reflect the higher yield associated with lower growth, which is behind the PAA and EPD reductions.

    So the key item is not current distribution coverage, but rather the future growth rates. MLPs which rely on organic growth have greater risk from lower commodity prices than those which will rely on sponsor drop down assets to drive distribution growth.
    May 28, 2015. 08:29 AM | 1 Like Like |Link to Comment