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Why Gathering & Processing MLPs Outperformed Others in February

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Gathering and processing MLPs

In this article, we’ll analyze the performance of MLP subgroups in February 2017. Among these subgroups, the gathering and processing subgroup, which includes Williams Partners (WPZ), ONEOK Partners (OKS), and MPLX LP (MPLX), benefited from a slight recovery in drilling activity. Gathering and processing MLPs’ throughput volumes are directly linked to producer activity. We’ll look into this later in this series.

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Upstream MLPs

Upstream MLPs, which include EV Energy Partners (EVEP) and Legacy Reserves (LGCY), formed the worst performing subgroup in February despite a slight recovery in commodity prices. This could be attributed to doubts related to survival of upstream MLPs under the prolonged low price environment. Two well-known upstream MLPs, Memorial Production Partners (MEMP) and Vanguard Natural Resources (VNR), recently announced bankruptcy. For more details, read Memorial Production Partners to File Bankruptcy: Key Highlights and Vanguard Natural Resources Can’t Make It, Files for Bankruptcy.

Coal MLPs

Based on performance, the coal-based MLP subgroup, which includes Natural Resource Partners (NRP), CNX Coal Resources (CNXC), SunCoke Energy Partners (SXCP), and Alliance Resource Partners (ARLP), was the second-worst MLP subgroup in February. The growth in consumption of natural gas, which is replacing coal as fuel for power utilities, could be the main reason for the decline in coal MLP stocks.

However, these MLPs might see some recovery driven by President Donald Trump’s plans to revive the coal sector. This includes plans to scrap the previous government’s clean power plan.

Downstream MLPs

Downstream MLPs formed the third-worst performing MLP subgroup in February. Downstream MLPs’ weak performance could be attributed to the current gasoline glut, which is expected to drive gasoline prices lower and result in lower profits for these MLPs.

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