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Why Linn Energy and Memorial Production Fell on Friday

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Upstream MLPs

Linn Energy (LINE) and Memorial Production Partners (MEMP) lost 12.80% and 11.14% of their equity value in a single trading session on Friday. They fell due to the announcement of their removal from the Alerian MLP Index (AMZ) and the Alerian MLP Equal Weight Index (AMZE).

Along with Linn Energy and Memorial Production Partners, Hi-Crush Partners (HCLP) will also be removed from the two indices. These securities will be removed due to recent distribution cuts. The securities that will be added include Boardwalk Pipeline Partners (BWP), Columbia Pipeline Partners (CPPL), and Vanguard Natural Resources (VNR). Vanguard Natural Resources is also an upstream MLP. It rose 0.24%.

The other biggest losers among upstream MLPs on Friday include Mid-Con Energy Partners (MCEP) and Atlas Resource Partners (ARP). They fell 7.98% and 7.35%, respectively.

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Upstream companies’ earnings are significantly tied to crude oil and natural gas prices. The United States Natural Gas Fund (UNG) tracks daily movements in natural gas futures. It rose 0.79%. For an in-depth analysis on the recent operating and market performance of the four largest upstream MLPs, read Tough Times: How 4 Upstream Energy MLPs Are Faring So Far.

United States Oil Fund

The United States Oil Fund (USO) fell 1.88% on Friday. USO tracks the daily movement in WTI (West Texas Intermediate) light crude oil. On Friday, WTI crude oil for October delivery settled $1.29 lower, or 2.81%, at $44.63 per barrel as Goldman Sachs slashed its crude oil price forecast for 2015 and 2016. For context, the upstream energy company heavy SPDR S&P Oil & Gas Exploration & Production ETF (XOP) fell 1.91%.

Alerian MLP ETF

The Alerian MLP ETF (AMLP) is comprised of 23 midstream energy MLPs. It fell 1.98% on Friday. AMLP underperformed the SPDR S&P 500 ETF Trust (SPY) and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) by 2.43 percentage points and 0.07 percentage points, respectively. SPY tracks the broader S&P 500 Index. It rose marginally by 0.45% on Friday. AMLP has returned -20.83% YTD (year-to-date), while SPY fell 4.28% over this timeframe.

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