The new Trump administration should bode well for MLPs, RBC analysts say, as cabinet appointments appear energy friendly and the federal regulatory environment could ease somewhat for energy; MLPs also could benefit from the new pro-infrastructure stance, which could help the group to stay clear of any tax changes.
The group was in a "hunker down" mode this year, RBC says, as the best performing MLPs mostly were those that came out of distress by successfully addressing balance sheet concerns - such as NGL Energy Partners (NYSE:NGL) and Plains All American Pipeline (NYSE:PAA) - and those most obviously exposed to the fundamental macro themes on the year - such as Targa Resources (NYSE:TRGP) and Oneok (NYSE:OKE)/Oneok Parnters (NYSE:OKS).
YTD, Oneok, American Midstream (NYSE:AMID) and USD Partners (NYSE:USDP) are the best performers in the sector, all more than doubling, while Ferrellgas Partners (NYSE:FGP) and Southcross Energy Partners (NYSE:SXE) both lost more than 50%.
American Midstream Partners (AMID +1.5%) rises to its 52-week high after disclosing plans for a $300M offering of senior unsecured notes due 2021.
AMID plans to use the proceeds to repay borrowings by its acquisition target JP Energy Partners (JPEP +2.2%) through its revolving credit facility of JPEP as well as paying down debt owed through its senior secured revolving credit facility.
AMID says it expects to close on the JPEP acquisition during Q1 2017.
American Midstream Partners (NYSE:AMID) agrees to acquire JP Energy Partners (NYSE:JPEP) in an all-stock deal, creating a midstream MLP with a ~$2B enterprise value.
JPEP's unitholders will receive $8.63/unit in the deal, a 14.5% premium to Friday closing price.
P-E firm ArcLight Capital Partners, the sponsor of both companies with a 15.6% holding of AMID and 19.8% of JPEP as of June 30, will combine the general partners of the two companies.
The combined company will own and operate more than 3,100 miles of gathering and transportation pipelines in some of North America's leading basins, including the Permian, Gulf of Mexico, Eagle Ford and Bakken.
Energy MLPs enjoyed a lift this week (at least until yesterday) following news of the Enbridge-Spectra merger, particularly those lacking sponsorship by producers that may be targets for consolidation.
FBR Capital says MLP valuations have improved ~45% from lows reached early this year, and expects macro trends to lift the sector; the firm thinks CAPL could enjoy double-digit growth for nearly seven years, and says MMLP is another notable outperformer whose valuation reflects more than enough discount for a distribution cut (which the firm is forecasting) - it also likes ENLK, EEP, TLP, SRLP, USAC, WLKP and USDP,
RBC notes favorable sentiment in the MLP realm, highlighting attractive valuations particularly at ETP, BWP and AMID, and sees dropdown stories - out of favor YTD - such as VLP and SHLX offering visible growth that can support the stocks over the next 12 months.