What Really Happened to Rice Midstream in June?
Top MLP Losers of June 2017
EVEP Energy Partners (EVEP) was the worst-performing MLP (master limited partnership) in June. EVEP has been among the worst performers for months now due to its weak liquidity position and high leverage.
During its 1Q17 earnings release, EVEP announced a borrowing base reduction from $450 million to $375 million, which resulted in the deterioration of its liquidity position. The recent volatility in crude oil and natural gas prices could have worsened the partnership’s liquidity position toward the end of 2Q17.
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Legacy Reserves (LGCY), another upstream MLP, was the second-worst-performing MLP in June, falling 27.7%, but LGCY has a slightly better liquidity position than EVEP.
According to LGCY CFO (chief financial officer) James Daniel Westcott, “This borrowing base combined with our Q1 debt reduction of $15 million provides us with ample liquidity of about $150 million to fund our operations, capital expenditures and potential bolt-on acquisitions.” LGCY has a $55 million capital budget for 2017.
Rice Midstream Partners
Rice Midstream Partners (RMP), the MLP with the lowest commodity price exposure, was also among the worst-performing MLPs last month. This was due to the sharp decline in RMP’s share price following the merger announcement between EQT Corporation (EQT) and Rice Energy (RICE). EQT agreed to acquire all of Rice Energy’s upstream assets, all of its retained midstream assets, and a 92.0% interest in Rice GP Holdings.
Rice GP Holdings owns the general partner of RMP. The sharp decline in RMP’s share price reflects EQT’s indication to drop down the retained midstream assets to EQT Midstream Partners (EQM), which are expected to generate $130.0 million of annual EBITDA (earnings before interest, tax, depreciation, and amortization) by the end of 2018. Still, the EQT-RICE merger will likely impact RMP’s growth opportunities.