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Midstream Snowmaking Underway

Dec. 03, 2018 8:43 AM ET10 Comments
Hinds Howard profile picture
Hinds Howard

Midstream traded up this week but underperformed the best week for the S&P 500 in years. Of the three main buckets of North American midstream, U.S. midstream corporations performed best, MLPs worst. Midstream also underperformed utilities. Midstream didn't outperform much of anything, outside of oil and NGL prices. Powell's not hawkish comments on Wednesday sparked a broad market rally and a decline in interest rates.

In addition to news of a potentially more accommodating Fed on Wednesday, other positive macro signals are emerging, including Russian openness to participating in a production cut with OPEC and positive rhetoric on potential de-escalation of trade war with China following President Trump's meeting with China's leadership over the weekend. In energy news, Canadian oil prices and differentials got a boost after Alberta stepped up to invest in rail transportation efforts.

Next week should be busy for energy and midstream. OPEC will meet late in the week, with chatter likely moving the market ahead of the meeting. The Wells Fargo conference in New York will provide another opportunity for midstream companies to get the word out on the strong fundamental backdrop and the progress they have made on improving their financial situations. Also next week, MPC will host its investor day, which will potentially provide some guidance on its go-forward plans for its multiple MLPs.

Trust the Dust Settling Process

After what seems like incessant snow globe shaking this year across midstream, with simplifications and rollups coming nearly every week (EQGP this week), some of the snow will settle in the coming weeks when the rollups of EEP and SEP close. WPZ, ETP, TEP, BWP buyouts (among others) have closed, but several remain pending (SEP, EEP, AM, ENLK, WES, EQGP, VLP, DM, TLP).

With the exception of the expected MPLX/ANDX combination or some

This article was written by

Hinds Howard profile picture
I serve as Portfolio Manager on the Listed Infrastructure Team at CBRE Clarion Securities, a global asset management firm based in Radnor, PA. My primary focus is on investing in Midstream companies, including Master Limited Partnerships (MLPs), as well as transportation companies (rails, airports) for larger infrastructure investment team.

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Comments (10)

BMW7 profile picture
I would certainly not sell ET here or WMB . Once interest rates start to drop MLP’s will be right back in the drivers seat
rlp2451 profile picture
Interest rates are back below 3% (10 year) - to where they were three months ago. I didn't look - did MLPs go up yesterday?

Are they where they were at the beginning of September?
papaone profile picture
A, what informtion led you to believe intgerest rates will "drop"? My simplistic guess is the rates on most things are near to where they will stay for a few years.
papaone profile picture
Very good report. I still like Williams and have added to my holdings. The future is natural gas and 1099's.
elliot_mllr profile picture
It would be nice if the Wells Fargo conference showing the strong fundamental background and progress being made by many MLPs, will enhance the MLP unit prices but don't bet on it. The attendees are already knowledgeable about MLP progress and the midstream fundamentals. These factors need to be absorbed by outsiders to the MLP world. That won't happen while financial journalists and commentators think that energy infrastructure equals crude oil pricing, and that natural gas, liquified natural gas and natural gas liquids don't exist and don't need infrastructure. That lack of perspective even infects the allegedly sophisticated financial publications and outlets.
Elliot Miller
DividendInvestorLA profile picture
@elliot_mllr : So what you're saying is that the Talking Heads and the media are failing the people who watch/read them on a very basic level...

I couldn't agree more. That's why I have been avoiding thme for the past few years.
Sometimes the share price beat-down feels like more than the lack of investor perspective. It feels political. There is a lot of money power that can affect markets in the climate change-anti-FF community.
DividendInvestorLA profile picture
koolsool: There is more than one move that has had that feel for me, even in the overall market. Of course, it's just a "feel" and could be entirely wrong, but certainly there's been many moves that felt orchestrated (of course when it goes up it feels entirely natural... :) ).
rlp2451 profile picture
What do you think the chances are of an LNG/CQP consolidation?
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