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MLP Distributions Continue to Rise despite Crude Oil Volatility

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Nov. 28 2016, Published 3:23 p.m. ET

MLPs’ distributions

In this article, we’ll look at MLP distribution trends. Thirty-seven out of 117 MLPs managed to grow their distributions, and 68 MLPs kept their distributions unchanged in 3Q16. These MLPs included the general partners of limited partnerships and midstream c-corporations.

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Distribution cuts

Ten MLPs announced distribution cuts in 3Q16. Plains All American Pipeline (PAA) and Emerge Energy Services (EMES) are among the midstream MLPs that announced distribution cuts in the quarter. Williams Companies (WMB), a C corporation general partner, also announced distribution cuts to support its subsidiaries’ growth plans.

Twenty-two MLPs including Kinder Morgan (KMI) have cut their distributions since the rout in energy prices. Most of the MLPs that have cut their distributions either have high commodity price exposures, high leverages, or both.

This means that ~80.0% of MLPs still managed to keep their distributions rising or constant following the rout in energy prices. Natural gas pipeline and retail propane MLPs are the two MLP subsectors that haven’t seen any distribution cuts over the past year. At the same time, upstream MLPs have seen the most distribution cuts.   

High distribution growth MLPs

Liquids pipeline and terminaling MLPs, which are involved in crude oil and refined products transportation and terminaling, have seen the highest median distribution growth compared to other MLP subsectors. Liquids pipeline and terminaling MLPs include Valero Energy Partners (VLP) and Shell Midstream Partners (SHLX).

Some general partners of midstream MLPs have industry-leading distribution growth. These include Tallgrass Energy GP (TEGP) and EQT GP Holdings (EQGP).

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