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NGL Energy Partners’ Implied Volatility Rose the Most

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High implied volatility in midstream stocks

On April 26, 2017, NGL Energy Partners (NGL) had an implied volatility of 40.5%—the highest among midstream companies in the Alerian MLP ETF (AMLP). NGL Energy Partners’ current volatility is 21.7% above its 15-day average.

Remember, stocks that see large movements—or ones that are expected to see large movements in the future—can have high implied volatilities.

Let’s take a look at a few other midstream stocks with high implied volatilities as of April 26, 2017:

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  • Teekay LNG Partners (TGP) – implied volatility of 37% or 3.5% below its 15-day average
  • Energy Transfer Equity (ETE) – implied volatility of 36.4% or 3.8% above its 15-day average
  • EnLink Midstream Partners (ENLC) – implied volatility of 32.9%, or 6.5% below its 15-day average
  • Rice Midstream Partners (RMP) – implied volatility of 31.3%, or 3.1% above its 15-day average

The recent rise in NGL Energy Partners’ implied volatility compared to its 15-day average represents the largest increase of the five midstream stocks with the highest implied volatilities.

On April 26, 2017, NGL Energy Partners’ implied volatility rose 19.9%, while the stock fell 0.6%. On April 26, 2017, Raymond James reduced its target price on the stock to by $6 to $20. Currently, the stock is trading at $16.40.

On April 24, 2017, NGL Energy Partners declared cash distribution of $0.39 for 1Q17. In its guidance, the company expects an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of ~$380 million for fiscal 2017. The adjusted EBITDA for fiscal 2018 could lie between $500 and $525 million. On April 25, following its earnings guidance, the stock fell ~24%.

Midstream stocks with low implied volatilities

Midstream stocks with the lowest implied volatilities on April 26, 2017, include the following:

  • Spectra Energy Partners (SEP) – implied volatility of 15.4%, or 0.7% less than its 15-day average
  • Magellan Midstream Partners (MMP) – implied volatility of 15.5%, or 3.5% less than its 15-day average
  • Enterprise Products Partners (EPD) – implied volatility of 16.6%, or 2.5% less than its 15-day average
  • Buckeye Partners (BPL) – implied volatility of 16.7%, or 0.1% less than its 15-day average
  • EQT Midstream Partners (EQM) – implied volatility of 18%, or 6.6% lower than its 15-day average

In the next part, we’ll look at the stock movements of the midstream stocks with the highest implied volatilities.

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