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Riders on the Storm: June's MLP Winners and Losers

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Part 2
Riders on the Storm: June's MLP Winners and Losers PART 2 OF 8

These MLP Subgroups Took June the Hardest

Upstream MLPs

Upstream MLPs (master limited partnerships) including EV Energy Partners (EVEP) and Legacy Reserves (LGCY) were the worst-performing subgroup in June 2017. On average, this group fell 25% during the month, compared with the SPDR S&P Oil & Gas Exploration & Production ETF’s (XOP) 1.8% fall.

The poor performance of upstream MLPs relative to other upstream companies could be attributed to their weak liquidity positions and high leverages, and their liquidity positions could deteriorate further if energy prices stay at current levels. That said, the survival of upstream MLPs remains uncertain under the current prolonged low price environment.

These MLP Subgroups Took June the Hardest

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Coal MLPs

Coal MLPs including Alliance Resource Partners (ARLP), CNX Coal Resources (CNXC), and Foresight Energy (FELP) were the second-worst-performing MLP subgroup in June, with a MoM (month-over-month) decline of 8.1%.

The huge decline in coal MLPs can be primarily attributed to the decline in natural gas prices below $3 per MMBtu (million British thermal units). The demand for of coal as a burning fuel by power utilities has been negatively impacted by the decline in natural gas prices. But US coal companies could bounce back if the Trump administration’s plans to promote the coal industry succeed in overcoming the widespread challenges that have stalled the rest of the administration’s agenda. Such coal-focused initiatives include pulling out of the worldwide Paris climate accord, rolling back polution and environmental safety regulations, and increasing coal exports.

G&P MLPs

G&P (gathering and processing) MLPs including DCP Midstream (DCP), Western Gas Partners (WES), and MPLX LP (MPLX) also ended June in the red. The decline in prices among G&P MLPs can be attributed to their relatively higher commodity exposure through natural gas processing. Other factors include investor concerns over declines in drilling activity and throughput volumes.

Downstream MLPs

Downstream MLPs including Calumet Specialty Products Partners (CLMT) and Alon USA Partners LP (ALDW) ended June in the green. Downstream MLP gains can be attributed to the decline in crude oil prices, which could have boosted refining margins in 2Q17.

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