mlps rocketed higher this week
TRANSCRIPT
MLPs Caught Fire This Week
Reports that some OPEC members, including Saudi Arabia, as well as non-member Russia, had proposed to freeze
production sent oil higher this week. It also fueled a pretty fierce rally in the energy sector, with MLPs and other
midstream companies in particular seeing huge gains, many jumping more than 20% this week. Leading the way, according to S&P Capital IQ data, were NGL Energy Partners (NYSE:
NGL), CONE Midstream Partners (NYSEMKT: CNNX), Teekay (NYSE: TK), Targa Resources (NYSE:
TRGP), and NuStar Energy (NYSE: NS).
What:
NuStar Energy (NYSE: NS) jumped 22% this week.
So What: Key driver: Higher oil prices Talk of a proposed output
freeze between several key OPEC producers and Russia drove oil higher this week
That fueled a rebound in energy stocks, with MLPs in particular seeing strong gains
Now What: While NuStar doesn’t have
direct exposure to oil prices, volumes on its Eagle Ford Shale pipelines have fallen due to declining production amid weak oil prices
Key takeaway: Actions to stabilize oil will help MLPs like NuStar because volumes might not fall as much as expected
What:CONE Midstream Partners (NASDAQ: CNNX) leapt 29% this week.
So What: Key driver: Fourth-quarter
results CONE Midstream reported an
excellent quarter with volumes, net income, and distributable cash flow growing strongly
Because of that, the company’s distribution coverage ratio is a very solid at 1.59 times
Now What: Because of its strong results,
solid financials, and current outlook CONE was able to increase its quarterly distribution by 3.6% over last quarter
Key takeaway: CONE Midstream is one of the few MLPs in the position to grow its distribution right now
What:
Teekay (NYSE: TK) jumped 33% this week.
So What: Key driver: Fourth-quarter
results and 2016 guidance Teekay reported strong cash
flow growth for the fourth-quarter
Its MLPs Teekay Offshore and Teekay LNG operated with high fleet utilizations thanks to strong portfolios of fee-based contracts
Now What: The company sees that cash
flow remaining strong in 2016 thanks to continued high fleet utilization and growth projects at its MLPs
Key takeaway: Teekay and its MLPs are weathering the downturn in the energy sector a bit better than investors expected
What:Targa Resources (NYSE: TRGP) surged more than 36% this week.
So What: Key driver: Completing the
acquisition of its MLP Targa Resources completed the
acquisition of all the outstanding units of its MLP, Targa Resources Partners, that it did not already own
In closing the deal, Targa will improve its credit and coverage profile, lower its cost of capital, and simplify its structure
Now What: The company also raised $500
million via a private preferred stock offering to reduce leverage and increase its liquidity
Key takeaway: Investors are glad that the deal has closed and that the company has bolstered its balance sheet
What:NGL Energy Partners (NYSE: NGL) surged almost 45% this week.
So What: Key driver: A rebound
after the prior week’s drubbing
NGL Energy Partners plunged more than 40% after reporting poorly received fiscal third-quarter results in early February
Now What: After taking some time to
digest those results, and the company’s watered down guidance, investors realized they overreacted
It also didn’t hurt that oil prices were higher last week, which helped lift all boats
Key takeaway: Sometimes investors overreact to the news
This could be the next billion-dollar iSecret