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DCP Midstream’s Market Performance Below Par in 2014

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DCP Midstream’s performance relative to the market

We’ve already discussed various issues in regard to DCP Midstream’s (DPM) operations and performance. But how much have these issues affected DCP Midstream’s market performance?

DCP Midstream (DPM) stock has posted a negative 17.3% return in the past one year. It was performing at par with the industry for most of 2014 but started underperforming in the industry and the broader market in December. DCP Midstream makes up 2.45% of the Alerian MLP ETF (AMLP).

In comparison, the Alerian MLP ETF’s (AMLP) return is negligible in the past one year. The broad market index SPDR S&P 500 (SPY) is up ~14% in one year.

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Why energy stock returns have been low

Returns on many energy stocks have tumbled since June when the price of crude oil began to crash. West Texas Intermediate (or WTI) price, which is the producers’ benchmark price in the United States, has decreased nearly ~55% since then.

This fall in prices has negatively affected revenues and margins of oil producers. The relative price difference between locations, or the spread, has narrowed, affecting midstream operators negatively. Crude oil supply has outstripped demand. This explains why AMLP’s returns have been low.

DCP Midstream underperformed some of its peers

DCP Midstream (DPM) has underperformed some of its peers, including TC Pipelines (TCP) and Boardwalk Pipeline Partners (BWP). TC Pipeline’s one-year return was 33%, while Boardwalk Pipeline’s one-year return was ~27%.

DCP Midstream, however, has outperformed Targa Natural Resources (NGLS), which returned a negative 24% in the past one year.

For a look at DCP Midstream’s distribution and coverage ratio, read the next section.

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