Why Calumet Specialty Products Partners Has Fallen 38% in 2016



CLMT’s stock performance

Calumet Specialty Products Partners (CLMT) has fallen 38% so far in 2016. It has generated total returns of -46% over the last year. In comparison, CVR Refining (CVRR), Alon USA Partners (ALDW), and Northern Tier Energy (NTI) have generated total returns of -22%, -23%, and 21% over the same timeframe. Refining MLPs generated positive returns in 2015 when the broader energy sector was in the red. Refining MLPs benefitted from the higher crack spreads due to low crude oil prices. Alon USA Partners forms ~0.5% of the PowerShares Dynamic Market ETF (PWC).

As the graph above shows, refining company stocks started falling in December 2015. Contracting refining margins and growing product inventories are putting tremendous pressure on refiners. This pressure has already resulted in some refiners declaring output cuts.

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Another factor that impacted CLMT’s fourth quarter performance as well as its stock price in 2016 was its DPR (Dakota Prairie Refinery). “I think what we saw in the fourth quarter was as the Bakken drilling was the slowing down, as diesel demand continued to drop in that North Dakota region, obviously that impacted our DPR Refinery significantly,” said Tim Go, CLMT’s CEO, during the 4Q15 conference call.

CLMT’s distributions

On January 19, 2016, Calumet Specialty declared 4Q15 distribution per unit of $0.69. This result was unchanged from its 3Q15 distribution. This past quarter was the tenth consecutive quarter with no increase in Calumet’s distributions. The company’s coverage ratio for 2015 was 0.7x, the same as 2014. Calumet’s low distribution coverage was the reason for its flat distributions over ten quarters.

Calumet Specialty currently trades at a massive distribution yield of ~22%.


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