By Maria Halmo
Over the past two years, as crude prices fell, upstream MLPs were hurt the worst, but gathering & processing MLPs also exhibited sensitivity to falling prices. Falling crude prices wore a hole in the fabric of the MLP space, and upstream and G&P MLPs were the loose threads investors couldn't stop pulling on. Large midstream MLPs certainly felt the increasing tension, but investors have worried what was once a small hole into something much larger. Equity prices have been pulled at so hard that credit ratings are now also stressed. March may have seen a small bounce for MLPs [1], but it is yet to be seen if the space will unravel faster than it can knit itself back together.
As of the close of business on March 31st, 40 of 118 MLPs were trading in the single digits. That's not a typo. Despite March being the first positive month for MLPs all year, the smallest MLPs are getting smaller.
Earlier this week, my colleague, Karyl Patredis, wrote about the macro situation with coal, but just to take it to the individual company level: five years ago, industry bellwether Peabody Energy (BTU) traded at $1,079.40 on a split-adjusted basis. At the close of the quarter, it was $2.32. Granted, BTU is not an MLP, but coal MLPs cannot escape their industry. Foresight Energy (FELP) has suspended distributions, suspended guidance, is in forbearance, and may not continue as a going concern. Rhino Resource Partners (RHNO), already OTC, had their general partner bought by Royal Energy Resources (OTC:ROYE), another OTC company, and announced a 1-for-10 reverse split. Unfortunately, it will still trade on the OTCQB [2]. As TS Eliot famously penned [3], "This is the way the world ends // Not with a bang but a whimper."
Further unravelling
