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An analysis of MarkWest Energy’s stock performance

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MWE stock jumps

After MarkWest Energy Partners (MWE) announced its 4Q14 earnings, the company’s stock jumped from $60.38 to $ 66.79. Since then, MWE has pared back these gains. As of March 6, 2015, the company’s stock was trading at levels close to $64.

In September 2014, commodity prices started declining rapidly. Since then, MarkWest’s peers Enbridge Energy Partners (EEP) and Energy Transfer Partners (ETP) have been holding their own, as the graph above shows.

However, MarkWest and Plains All American Pipeline (PAA) haven’t been as immune to the falling prices. Both companies’ returns have decreased since September and have even underperformed the broader MLP (or master limited partnership) ETF, the Alerian MLP ETF (AMLP).

All together, EEP, ETP, and PAA make up about 27% of AMLP. PAA and ETP also make up about 4% of the First Trust North American Energy Infrastructure ETF (EMLP).

MLPs in general are not as exposed to commodity price risks as their upstream counterparts. However, some MLPs do have direct exposure. In exchange for services, these, MLPs get paid in kind in commodities.

MarkWest stated that its sensitivity to changes in commodity prices has decreased in 2015. In its press release, the company noted that “the partnership has become less sensitive to changes in commodity prices as a result of significant increases in fee-based income.”

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In terms of price returns, MWE’s performance has been the lowest during this period. In January 2015, the company offered negative returns to the tune of 30% compared to September 2014. Although MarkWest’s performance has since improved, the company continues to trade at levels lower than those of September 2014.

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