RECENT MLPs RESEARCH
The spread between the Alerian MLP Index and the BofAML BBB Corporate Credit Index closed in slightly since the end of April, though still remains wide by historical standards.
Corporate debt rates for MLPs increased slightly over the past two weeks, but from a long-term perspective debt funding still remains extremely cheap.
Treasury rates inched up slightly last week, and a continued move up in rates could be negative for rate-sensitive instruments such as MLPs.
Equity financing continued to get cheaper for MLPs, providing cheap capital for growth, but also compressing distribution yields for potential investors.
Many natural gas processors have contracts that are sensitive to prices in natural gas and natural gas liquids (NGLs). Frac spreads reached ~$30/barrel in mid-February but have recently dropped to…
March 2013 showed continued production growth in the Bakken. Most expect the Bakken to continue to grow rapidly which is a positive for midstream names (mostly MLPs) with assets in the area.
Treasury yields increased last week, and a continued movement upward could hurt the valuation of rate-sensitive instruments such as MLPs. However, from a long-term context rates remain very low.
The spread between the Alerian MLP Index and corporate credit was relatively unchanged last week.
Plains All American Pipeline beat its 1Q13 EBITDA guidance by 20%, a strong performance which benefits names such as GEL and SXL.
Last week, frac spread declined roughly 4% to give up some of their gains in the week prior and negatively affecting gas processors’ margins.
Treasury rates continued to compress last week, which is a positive for the rate-sensitive MLP sector.
Frac spreads increased by over 9% last week, as natural gas prices declined and natural gas liquids prices generally were unchanged or up on the week.
The spread between the BofAML BBB Corporate Credit Index and the Alerian MLP Index widened by 9 bps last week.
The cost of equity remains low for master limited partnerships which is a positive for funding growth capex.
The cost of debt for MLPs, both investment grade and non-investment grade, continues to trend lower.
The spread between corporate credit and MLP yields remained relatively unchanged last week. However, from a historical perspective the spread is currently wider than average.
Treasury rates remain near all-time lows which has been a positive for MLP stocks.
Fractionation spreads last week declined by nearly seven percent, which cuts into margins of commodity sensitive gas processors.
Continued growth in Marcellus activity should be positive for midstream names with assets strategically located in the area.
The IPO of two MLP closed-end funds should result in increased demand for MLP names and provide price support to the sector.